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The two men vying to occupy the White House for the next four years say they want to reform our current complicated tax system. But until that can be achieved, President Barack Obama and Mitt Romney are proposing tweaks to the existing tax code.

Both candidates offer the American electorate only general outlines of their major tax proposals.

The Obama campaign’s tax website touches on broad concepts such as raising tax rates on higher-income individuals and closing loopholes on millionaires and billionaires. As for more specifics, the president has elaborated on tax changes he supports in his annual budgets and State of the Union addresses, as well as in the corporate tax reform proposal issued by the U.S. Treasury earlier this year.

Romney also lists on his campaign website some general tax changes he favors, such as income tax rate reductions and maintaining the current tax treatment of investments. But the Republican candidate’s plan also is light on details.

Romney’s selection of Rep. Paul Ryan, R-Wis., to be the Republican vice presidential nominee raised some tax watchers’ eyebrows. As House Budget Committee chairman, Ryan created a plan that calls for just two individual income tax rates (10% and 25%) and no investment taxes for anyone regardless of income. However, Romney says he, not the new vice presidential candidate, is in charge of the campaign’s fiscal proposals.

And while Obama makes no apologies for wanting to collect more money from some taxpayers, Romney insists that any tax changes should be revenue-neutral, meaning that if some taxes are hiked, others should be lowered to counter the increase. The Romney camp, however, has not provided any detail about what tax deductions or credits it would target to achieve federal revenue neutrality.

Here’s a look at Obama’s and Romney’s positions on major tax areas affecting individual and business taxpayers. Not surprisingly, the two men’s tax plans generally reflect the differences between their two political parties.

Candidates’ proposals for changes to current tax laws:

Ordinary individual income tax rates

Current tax rates:

  • 10%
  • 15%
  • 25%
  • 28%
  • 33%
  • 35%
Barack Obama’s tax proposals Mitt Romney’s tax proposals
Six tax rates with top rate applied to adjusted gross income of $200,000 for individuals, $250,000 for families:
  • 10%
  • 15%
  • 25%
  • 28%
  • 36%
  • 39.6%
A 20% reduction of the current six tax rates. Romney is also considering itemized deductions to a certain dollar amount:
  • 8%
  • 12%
  • 20%
  • 22.4%
  • 26.4%
  • 28%

Interest, dividend, capital gains

Certain qualified dividends are currently taxed at capital gains rates, which are zero percent for taxpayers in the 10% and 15% tax brackets and 15% for all other taxpayers.

General interest earnings, i.e., on such investments as CDs, are taxed at ordinary tax rates.

Carried interest, i.e., the share of profits that private equity and hedge fund partners receive as compensation, is taxed at capital gains rates.

Barack Obama’s tax proposals Mitt Romney’s tax proposals
Increase capital gains tax rate to 20% on high-earners.

Impose the so-called Buffett rule, i.e., a minimum 30% tax on high-earners.

Dividends taxed as ordinary income for individuals with adjusted gross income of $200,000 ($250,000 for married couples filing jointly).

Carried interest taxed as ordinary income.

Eliminate taxes on investment income for taxpayers with adjusted gross income of less than $200,000.

Retain 15% tax on interest, dividends and capital gains for all other taxpayers.


Estate tax

Currently, estates worth up to $5.12 million are not taxed, with estates worth more than that taxed at 35%.

Barack Obama’s tax proposals Mitt Romney’s tax proposals
Exempt estates worth up to $3.5 million and increase estate tax rate to 45%. Repeal estate tax permanently. This would enable estates worth any amount to pass from one party to the next with no tax.

Alternative minimum tax (AMT)

Separate tax rates of 26% and 28% currently apply to certain taxpayers who make more than an excluded threshold amount.

Barack Obama’s tax proposals Mitt Romney’s tax proposals
Replace the AMT with the so-called Buffett rule, which would require people making more than $1 million a year to pay at least 30% of investment income in taxes. Repeal the AMT altogether.

Corporate tax rate

The corporate tax rate is 35% at the present time.

Barack Obama’s tax proposals Mitt Romney’s tax proposals
The proposed rate is 28%, except for manufacturers, which would face a 25% rate. The proposed rate is 25%.

International taxes

This is generally a worldwide system where all income, regardless of where earned, is taxed.

Barack Obama’s tax proposals Mitt Romney’s tax proposals
Institute a minimum tax on overseas profits and other international proposals. Institute a territorial system that would tax U.S.-source profits of multinational corporations but would exempt profits earned abroad.

Research and development (R&D)

There was a 20% credit for qualified R&D expenditures in excess of a base amount; a 14% simplified credit was available to eligible taxpayers. This R&D credit expired Dec. 31, 2011. It’s expected to be renewed.

Barack Obama’s tax proposals Mitt Romney’s tax proposals
Reinstate the current business R&D credit that expired Dec. 31, 2011. Strengthen (no details provided) and make permanent an R&D credit.

Energy

A renewable electricity production tax credit for, in part, wind, solar, geothermal energy production is available, as is a variety of tax credits and deductions for oil and gas operations.

Barack Obama’s tax proposals Mitt Romney’s tax proposals
Make the tax credit for production of renewable electricity permanent and refundable.

Eliminate tax preferences for fossil fuels.

Streamline energy production permitting. Focus on traditional energy resources rather than green technologies that typically are too expensive to compete in the marketplace.

Note: Many of these provisions are set to expire at the end of 2012.