Most of the expiring tax cuts were first enacted under former President George W. Bush and extended by Obama in 2010. This time around, Obama says he is determined to let the tax cuts expire on income above $200,000 for individuals and $250,000 for married couples. He wants to extend the Bush tax cuts for people making less.
House Speaker John Boehner and other Republicans have said they are open to more tax revenue through reducing or eliminating tax breaks. But Boehner opposes Obama's proposal to increase tax rates on high earners.
"Raising taxes on small businesses instead of taking a balanced approach that also cuts spending is wrong," Boehner, said recently. "It's only going to make it harder for our economy to grow. And if our economy doesn't grow, Americans don't get new jobs and the debt problem that we have will continue to threaten our children's future."
Republicans often relate the tax increases to small businesses because 94 percent of America's businesses are structured so that profits go directly to partners or shareholders who report the income on their individual tax returns. It's a way for business owners to avoid paying taxes twice on the same income â¿¿ once at the corporate level and again when profits are distributed as dividends.Under Obama's plan, the 33 percent tax rate would rise to 36 percent on taxable income above $231,000 for a married couple filing jointly. The top tax rate would increase from 35 percent to 39.6 percent on taxable income above $397,000. Obama's plan also would phase out the personal exemption and gradually reduce itemized deductions for individuals making more than $200,000 and married couples making more than $250,000. The top capital gains tax rate would rise from 15 percent to 20 percent. Qualified dividends, which are now taxed at a top rate of 15 percent, would be taxed as ordinary income for top earners, or at a top rate of 39.6 percent.