Last week President Obama released his federal budget proposals for fiscal year 2013.

On the same day, the Treasury released its General Explanations of the Administration’s Fiscal Year 2013 Revenue Proposals (the so-called “Green Book”). The proposals include more than 130 proposed tax changes for businesses and individuals, including new incentives to “insource” jobs, higher taxes for upper-income taxpayers and extension of key tax breaks.

Given that 2012 is an election year and the two major political parties have found little common ground in recent tax debates, it remains to be seen whether any of these proposals – with the exception of the extension of the payroll tax cuts already passed by Congress – will actually become law prior to the election.

Below is a summary of some of the president’s key tax proposals.

Business tax proposals

The payroll tax cut currently in place for January and February of this year has been extended for the rest of 2012 pending the president’s signature.

The president proposes a tax credit for qualified employers who increase their wage expense – whether driven by new hires, increased wages or both. The president would also like to extend through 2012 the 100 percent bonus first-year depreciation deduction.

Proposed tax increases include repeal of the last-in, first-out (LIFO) accounting method and the lower-of-cost-or-market and subnormal-goods methods of inventory accounting, beginning in 2014.

A new general business tax credit equal to 20 percent of the eligible expenses paid or incurred in connection with insourcing a U.S. trade or business would encourage companies to bring jobs back to the United States, while deductions for expenses paid or incurred in connection with outsourcing a U.S. trade or business would be disallowed.

Effective retroactively to Jan. 1, 2012, the president proposes to make the research credit permanent and increase the rate of the alternative simplified research credit.

Tax changes proposed for individuals

The president would like to reinstate the upper-income taxpayers’ reduction of itemized deductions and the phaseout of personal exemptions beginning in 2013. In addition, he would allow the so-called Bush era tax cuts to expire after 2012 for those with household income over $250,000 a year for joint filers and $200,000 for single taxpayers.

For dividends received after Dec. 31, 2012, the current reduced tax rates on qualified dividends would be eliminated for income that would be taxable in the 36 percent or 39.6 percent brackets. For upper-income taxpayers, the result would be taxation of dividends as ordinary income.

Beginning in 2013, the maximum tax rate on long-term capital gains would increase to 20 percent for those in the 36 percent and 39.6 percent brackets. The 15 percent rate would continue for those in lower tax brackets.

Also beginning in 2013, the tax value of specified deductions or exclusions and all itemized deductions would be limited. The limit would apply to:

• Tax-exempt state and local bond interest
• Employer-sponsored health insurance paid for by employers or with before-tax employee dollars
• Health insurance costs of self-employed individuals
• Employee contributions to defined contribution retirement plans and individual retirement arrangements
• The deduction for income attributable to domestic production activities
• Certain trade and business deductions of employees
• Moving expenses
• Contributions to health savings accounts and Archer medical savings accounts
• Interest on education loans and certain higher education expenses

The change would apply to itemized deductions after they have been reduced by the proposed statutory limit on certain itemized deductions for higher income taxpayers.

The administration’s description of the president’s FY 2013 budget (but not the Treasury’s “Green Book”) also calls for imposition of the “Buffett Rule,” under which those making more than $1 million would pay no less than 30 percent of their income in taxes. The Buffett Rule would replace the alternative minimum tax.

Estate and gift tax proposals

The estate, generation-skipping transfer (GST) and gift tax parameters as they applied during 2009 would be made permanent. The top tax rate would be 45 percent, and the exclusion amount would be $3.5 million for estate and GST taxes and $1 million for gift taxes.

These changes would apply for estates of people who die, and for transfers made, after Dec. 31, 2012. The provision allowing a surviving spouse to use the deceased spouse’s unused estate tax exclusion, which expires for people who die after Dec. 31, 2012, would be made permanent.

In addition, rules regarding valuation discount would be modified, and the use of an intentionally defective grantor trust as an estate planning tool would be severely limited.

Other proposals

Many expiring provisions would be extended. For example, the optional deduction for state and local general sales taxes, the deduction for qualified out-of-pocket classroom expenses and the deduction for qualified tuition and related expenses would be extended through Dec. 31, 2013.

The president’s budget also calls for increases in the IRS’s tax enforcement and compliance budget to enable the IRS more effectively to crack down on “tax cheats and delinquents,” resulting in more revenue, and to implement many recent tax law changes. The plan also includes a host of measures to expand information reporting and improve compliance by businesses (e.g., require more forms to be filed electronically) and specific changes to step up collection of taxes.

Read more about the budget proposals here.