President Barack Obama, in his State of the Union address, proposed a minimum 30% tax on income over $1 million. High earners would lose deductions for mortgage interest, health care, retirement and child care. There seems to be little chance of enactment of any of these provisions this year, given the amount of congressional gridlock we have seen this year.
In order to raise the tax rate of high income earners, instead of raising taxes on investment income, the Obama proposal would create a new 30% alternative minimum tax (AMT) for high earners. Interestingly, the AMT is often cited as the most complicated part of the Internal Revenue Code, and is the first target of reforms aimed to simplify” the tax code.
Obama also said he would increase scrutiny of Wall Street by setting up a Financial Crimes Unit in the Justice Department to investigate fraud.
