Omnibus Budget Reconciliation Act of 1993

Also known as the Budget Reconciliation Act of 1993 and the Deficit Reduction Act of 1993, OBRA 93 legislation resulted in a tax increase to both individuals as well as corporations. Several of the major provisions of this new tax code included:

Individuals

• Tax Brackets: the total number of brackets was increased from three to five, with the introduction of the 36% and 39.6% federal income tax rates.

• Social Security: the portion of Social Security benefits subject to federal income tax was increased from 50% to 85%.

• Medicare: eliminated the income cap of $135,000 subject to the 2.8% Medicare tax.

• Exemptions and Deductions: the income-based phase-out of personal exemptions and the limits on itemized deductions were permanently extended.

• Motor Fuels Tax: extended the current tax of 2.5 cents per gallon, while increasing the fuel tax by 4.3 cents per gallon of gasoline.

Corporations

• Tax Brackets: the top tax rate for corporations was increased from 34% to 35%.

• Lobbying Expenses: costs associated with lobbying efforts were no longer deductible on federal income tax returns.

• Goodwill Amortization: the length of time over which goodwill could be amortized was increased to 15 years.

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