[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2009/images/08/05/art.healthcare.0805.gi.jpg caption="Before health care can be cleared off the plate, Obama will have to answer some key tax questions."]
NEW YORK (CNNMoney.com) - President Obama's fall agenda has grown largeras some of the biggest decisions - and fights - over health care reform have been punted to September ... at the earliest.
But health reform is not the only major initiative he wants to get done. Far from it. There's climate change. There's reforming Wall Street. And, of course, there's passing a budget for 2010 at a time of huge deficits. Running in the background to all of this will be one of the biggest
issues the Obama administration must address: taxes.
"As soon as they can clear health care off the plate, it will be taxes, taxes, taxes," said Anne Mathias, director of research at Concept Capital's
Washington Research Group.
Health reform taxes: Before health care can be cleared off the plate, Obama will have to answer some key tax questions.
For starters, he will need to be more explicit about what he will accept in terms of increasing taxes to pay for health reform and indicate exactly which of the revenue raisers on the table in Congress he considers deal-breakers.
The president originally proposed limiting the itemized deductions that high-income tax filers could take, an idea that fell flat with lawmakers. He doesn't like what had been a leading idea in the Senate to help fund reform –taxing what are currently tax-free health benefits that workers receive from their employers. But at various times he has indic ated indirectly he might be open to it in some limited form.
Now the idea gaining currency in the Senate is to tax insurers who offer very expensive plans. Critics say such a tax could either be passed on to workers through higher premiums or reduced benefits. In the House, meanwhile, the leading idea is to impose a surtax - or additional tax - on thehighest-income households.
"The problem here is there are no good ideas," said Clint Stretch, managing principal for tax policy at Deloitte Tax.
Translation: Only proposals to cut taxes typically generate support.
Winning the debate over a tax hike is guaranteed hard slogging. Estate taxes: Regardless of what happens with health reform, lawmakers
and the administration will have to make a decision about what to do about the estate tax. Otherwise, it will be repealed for one year, starting on Jan. 1,2010.
Since that's revenue the country can't afford to lose, what's most likely to happen is that Congress will extend the estate tax for one year at the 2009 exemption levels, Mathias and Stretch said. In that case, the first $3.5 million of an individual's estate would be exempt from the federal estate tax. And the taxable portions of the estate would then be taxed at rates up to 45%.
Then in 2010, lawmakers are likely to address what to do with the estate tax on a more permanent basis. Obama has proposed making the estate tax permanent at the 2009 exemption levels.
But doing so will look like a revenue loser over 10 years. That's because it would raise less tax money than what's set to happen under current law. If nothing is done by 2011, the first $1 million of an estate would be exempt from the tax and the top rate would be 55%.
Climate change taxes: Whether or not lawmakers succeed in getting a climate change bill ready for the president's signature before the year is out, there is likely to be discussion over several revenue issues. For example, what to do with revenue generated from a cap-and-trade program in which carbon-emission permits are bought and sold?
Corporate taxes: Obama has said he wants to close what he calls corporate tax loopholes.
The administration laid out a few proposals to that effect earlier in the year, particularly with regard to U.S. companies doing business overseas. And Obama created a tax reform panel and asked it to make suggestions by Dec. 4 about how to raise more revenue. Corporate tax breaks are a focus for the group.
But it's not clear how Obama's corporate tax proposals will fly given that taxwriters on Capitol Hill have already crafted many of their own
proposals. Some lawmakers only want to curb corporate breaks and simplify the corporate tax code if rates are lowered, a step Obama has not yet proposed.
"The Hill knows where it wants to go on tax reform generally. They want to close the tax gap and they want to do international tax reform," Stretch said. But he doesn't envision the changes as big revenue raisers per se. Rather, he said, the overarching goal would be to make U.S. businesses operating abroad more competitive.
"It won't be about raising revenue, but about lowering rates. The point of doing it is to generate more business," Stretch said.
Although discussions will be had, he only thinks there's a 50/50 chance that international corporate tax reform will be completed in the next year. Kitchen sink taxes: There are a host of tax provisions that, barring lawmaker action, will expire in 2009 and 2010. Many are tax breaks that companies and individuals have come to expect and which lawmakers typically extend every year. Among these are the research and development credit for businesses, relief from the Alternative Minimum Tax for middle- and upper-middle-income families and various renewable energy tax credits.
What's very possible is that extensions for most such expiring provisions will be bundedl into one bill at some point next year. "There's no way they can get through 2010 without a tax bill," Mathias said.
The midterm elections provide added incentive, she noted. "Democrats will want to campaign on extending popular provisions."