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3 of President Obama’s weirdest new taxes

Rich Coleman
by Rich Coleman
April 11, 2013
  • Policy and culture
2 minute read
  • SHARE ON

President Obama has long been in favor of getting rid of the corporate jet loophole. Now he’s adding … flavored vodka to the list?

To get the economy back on the right track and achieve $1.8 trillion in new revenue, the president has suggested many big taxes in his budget proposal. This includes the policies he’s been battling Republicans over for years:

  • taxing higher incomes by capping itemized tax deductions
  • reducing domestic-production credits for oil companies
  • implementing a 30% minimum tax rate for people making over $1 million in a year, and
  • taxing investment managers’ “carried interest” profits as regular income.

But the budget proposal has also included some odd moves aimed at raising taxes (or closing loopholes) in areas the typical taxpayer might not think of.

Weird taxes

Flavored vodka tax

Who doesn’t enjoy some Absolut Mandarin or Pinnacle Cotton Candy vodka?

Well, don’t pour out any for the president. Included in his proposal is a move to do away with tax breaks for distilleries that add flavors to their vodkas. Spirits are taxed at $13.50 per proof-gallon, but if distillers add flavorings, they get a break: Up to 2.5% of the alcohol in those flavoring mixtures is exempt from the spirits tax.

Doesn’t sound like much but the Treasury claims this break gives an unfair advantage to foreign distilleries that have no restrictions on flavorings. This new move would certainly help even the playing field for US distilleries.

Closing the golf course tax haven

An Alabama land developer bought real estate in the 1990s, created a business to build a golf course on it and developed the land around the golf course. In 2002, he had the business place a conservation easement for preserving recreational activities (golf), donated it to a conservation land trust and claimed the value of the easement as a charitable-giving tax deduction.

Obama says no more. The treasury claims the deductions are excessive and mainly advance private interests of donors.

No more punitive damage breaks

If your company was ever sued and forced to pay out damages, there was at least one silver lining: writing off those damages. But now? No more. The White House plan would not only prevent businesses from deducting punitive damages from their taxable income, it would tax damages paid out by insurers, too: If a business takes out an insurance policy for some kind of liability, and that insurer ends up paying out damages on behalf of the company under its policy, those damages would be added to the business’s taxable income.

 

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