Sean Neary/Meaghan Smith
Summary of the American Family Economic Protection Act
Today, Senate Majority Leader Harry Reid, unveiled the American Family Economic Protection Act -- legislation to replace the indiscriminate, across the board federal spending cuts known as “the sequester” with an alternative deficit reduction proposal that includes a balanced mix of spending cuts and revenue increases. Following is a summary of the tax provisions in the American Family Economic Protection Act.
In an effort to restore fairness to the nation’s tax code, the Buffett Rule ensures that wealthy taxpayers do not use loopholes and deductions to pay a lower average tax rate than middle class families. This rule is named after billionaire investor Warren Buffet who pays a lower tax rate than his secretary. This provision would apply the Buffett rule to taxpayers with adjusted gross incomes (AGI) greater than $1 million (after subtracting out charitable contributions) who are paying less than a 30% average tax rate in combined income tax, alternative minimum tax, and the employee’s portion of the payroll tax. Specifically, the American Family Economic Protection Act would require these taxpayers to pay a 30% tax on all of their AGI (less charitable contributions), phased in between $1 million and $5 million.
The provision is estimated to raise $53.0 billion over ten years.
Tar sands and Oil Spill Liability Trust Fund
Under current law, crude oil is subject to an 8 cent per barrel oil spill liability trust fund tax, but oil derived from tar sands is not. Revenues from this tax are deposited in the oil spill liability trust fund and are used to clean up oil spills including spills from oil derived from tar sands. The proposal would now include oil from tar sands as a taxable petroleum product for purposes of the oil spill liability trust fund.
The provision is estimated to raise $2.0 billion over ten years.
Deny deductions for companies offshoring jobs costs
Under current law, companies may generally deduct 100 percent of ordinary and necessary business expenses. These may include the cost of shipping equipment, terminating leases, and other expenses associated with relocating a business. This provision would deny tax deductions for “outsourcing” costs, i.e., the cost of relocating a U.S. business unit to a foreign country.
The provision is estimated to raise $0.2 billion over ten years.
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