President Obama’s 2013 Budget Proposes Enhanced Tax Incentives

President Obama’s 2013 Budget Proposes Enhanced Tax Incentives

February, 2012

President Obama’s 2013 Budget Proposes Enhanced Tax Incentives

President Obama’s 2013 Budget Proposal outlines changes to the R&D Tax Credit, adds a new job creation incentive, and introduces the “Buffet Rule.”

American Innovation and Manufacturing

  • $140.8 billion for R&D overall; increase the level of investment in non-defense R&D by 5 percent from the 2012 level, even as overall budgets decline; maintains the President’s commitment to double the budgets of three key basic research agencies (National Science Foundation, Department of Energy’s Office of Science, and National Institute of Standards and Technology Laboratories); expands (enhances)  and makes permanent the R&D Tax Credit.

Jumpstart Job Creation

  • A new tax credit for this year focused on small businesses and that gives businesses that add jobs and wages a tax cut equal to 10 percent of wages added up to $500,000.

The “Buffet Rule”

  • The budget characterizes the “Buffet Rule” as: “No household making over $1 million annually should pay a smaller share of its income in taxes than middle class families pay.”. Its name derives from Warren Buffet’s observation that his effective tax rate is lower than his secretary’s.
  • The budget proposes that those making more than $1 million should pay at least 30% of their income in tax. The budget’s introduction says that “[t]he Administration will work to ensure that this rule is implemented in a way that is equitable, including not disadvantaging individuals who make large charitable contributions” (id.), but no specifics are provided.
  • The president is proposing that this “Buffet Rule” replace the current AMT.

Summary

Our hope is that these incentives remain part of the budget when passed. From an R&D Tax Credit perspective, our clients will be able add staff with the knowledge that the credit is permanent.

The enhancements to the credit will provide additional funds for R&D to our clients and the “Buffet Rule” could open up the credit to tens of thousands of small to medium size businesses. Today, many owners of SMBs are paying AMT and so have been unable to take advantage of the credit because the credit could not reduce AMT.

Lastly, the new credit “Jumpstart Job Creation” will assist our Hiring & Location Incentive clients to add new staff and help increase employment for the country.