During the Obama administration, several significant tax policy changes were implemented with the aim of addressing economic challenges, promoting fairness, and stimulating economic growth. These changes can be broadly categorized into three main areas: individual income taxes
, corporate taxes, and estate taxes.
1. Individual Income Taxes:
Under the Obama administration, there were both temporary and permanent changes to individual income tax
rates. The American Recovery and Reinvestment Act of 2009 (ARRA) temporarily reduced taxes for individuals through various measures such as the Making Work Pay tax credit and the expansion of the Earned Income
Tax Credit (EITC) and Child Tax Credit
(CTC). These measures aimed to provide relief to low- and middle-income individuals and families during the economic downturn.
Additionally, the Affordable Care Act
(ACA) introduced several tax provisions, including the Net Investment Income
Tax (NIIT) and the Additional Medicare Tax. The NIIT imposed a 3.8% tax on certain investment income for high-income individuals, while the Additional Medicare Tax increased the Medicare payroll
tax rate by 0.9% for individuals earning above a certain threshold.
Furthermore, the American Taxpayer Relief Act of 2012 (ATRA) made several permanent changes to individual income taxes. It increased the top marginal tax rate
from 35% to 39.6% for individuals earning above a certain threshold. It also reinstated the phase-out of itemized deductions and personal exemptions for high-income individuals.
2. Corporate Taxes:
The Obama administration implemented various changes to corporate tax policy with the goal of promoting domestic investment, job creation, and reducing tax loopholes. The ARRA included provisions such as bonus depreciation
and enhanced expensing for businesses to encourage investment in new equipment and machinery.
Moreover, the administration proposed reducing the corporate tax rate from 35% to 28% and eliminating certain tax preferences for oil and gas companies. However, these proposals did not materialize into law due to political challenges and opposition.
3. Estate Taxes:
The estate tax, also known as the "death tax," underwent significant changes during the Obama administration. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) gradually reduced the estate tax rate and increased the exemption amount over time. However, the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010 (TRUIRJCA) temporarily repealed the estate tax for 2010, leading to a unique situation where estates were not subject to taxation that year.
Subsequently, the ATRA reinstated the estate tax in 2011 with a top rate of 35% and an exemption amount of $5 million (indexed for inflation). The ATRA also made these changes permanent, with subsequent adjustments for inflation.
In summary, tax policy changes during the Obama administration aimed to provide relief to individuals and families, promote economic recovery, address income inequality
, and ensure fairness in the tax system. These changes included temporary tax cuts, permanent adjustments to individual income tax rates, provisions related to healthcare reform, incentives for business
investment, and modifications to estate taxes.