WASHINGTON — The Obama administration is digging deep into the tax code to find ways to help pay for its ambitious plans to cut taxes for middle-income families and small businesses while also overhauling the nation's healthcare system.
The Treasury Department plans to raise $58 billion in taxes over the next 10 years -- targeting mainly securities dealers, life insurance firms and large estates -- and to close $210 billion in tax loopholes for multinational corporations.
The money will help offset the administration's proposal to cut taxes by $736 billion for middle-income families and $99 billion for small businesses during the same period, Treasury officials said Monday.
The additional $58 billion in revenue, highlighted along with dozens of other changes to the minutiae of the tax code, would help fill a gap in the administration's $634-billion fund to help pay for major healthcare changes. The shortfall developed after revenue projections fell short.
The difficulty of making projections during the economic crisis was highlighted Monday when the White House also raised its estimate for this year's budget deficit as the recession increased spending on government benefits and reduced the amount of taxes people paid. The Office of Management and Budget estimated that the deficit would reach $1.84 trillion, a 5% increase over the administration's estimate released in February.
Obama administration officials downplayed the new deficit figures and stressed the need to pass the budget proposals.
"We are taking the next step in creating fairness in our economy by ending loopholes that allow companies to avoid paying taxes while millions of hardworking families and small businesses pay their fair share," Treasury Secretary Timothy F. Geithner said in a statement.
But the higher deficit figures and additional proposed taxes, along with details of corporate tax breaks the Obama administration wants to ax, led to sharp criticism of the White House from some Republican lawmakers and business groups. It was a taste of the battle to come on Capitol Hill, where lawmakers and lobbyists have prevented some of the proposed changes in the past.
"The administration's displayed an insatiable appetite for spending and they need to get money wherever they can. So they use the tax code the way Willie Sutton used a gun," said Martin A. Regalia, vice president for economic and tax policy at the U.S. Chamber of Commerce, referring to the famous bank robber.
The $58 billion in additional tax revenue includes $24.2 billion from changing the way assets in estates are valued, $12.8 billion from modifying rules for some life insurance company products and contracts and $2.6 billion from changing the way income is treated for some dealers of equity options and commodities.
Insurance groups protested the changes Monday.
"Seventy-five million American families rely on the products offered by life insurers for their financial and retirement security," said Frank Keating, president of the American Council of Life Insurers. "This is absolutely the wrong time to make it more expensive for families, as well as U.S. businesses, to obtain the security and peace of mind our products provide."
President Obama last week riled business groups by vowing to crack down on overseas tax loopholes that he said multinational corporations were abusing. Treasury officials released details Monday of several changes to tax benefits for some overseas investments.
One change, for instance, would eliminate a federal rule that now allows companies to take an immediate tax deduction for overseas investments while delaying tax payments on overseas income. Federal officials, noting that taxpayers generally can't defer their tax bill, contend that it's unfair to let companies do so.
The Chamber of Commerce blasted the revisions.
Regalia disputed that the provisions were loopholes, saying they were long-standing rules designed to help companies compete globally.
He contended that the tax deferral was designed to offset the competitive disadvantages facing U.S. companies. Such disadvantages, he said, include the requirement to pay taxes on foreign earnings to the country where the money was earned as well as to the U.S. when the money is sent home. Most other countries don't require their companies to pay taxes on foreign earnings, he said.
"I fail to see, and have not heard anything from the administration that explains, how increasing the tax on a U.S. company operating abroad will create jobs at home," Regalia said. "They're trying to compete against foreign multinationals, selling the same products in the same markets that don't have the same tax issues."
Treasury officials also outlined plans to eliminate $36 billion in tax breaks for oil companies for activities such as exploration and drilling and to reinstate excise taxes used to help clean up federal Superfund environmental sites. The excise taxes expired in 1996 and would generate about $16.7 billion over 10 years.