The term Omnibus Budget Reconciliation Act of 1993 refers to a law that attempted to reduce the federal deficit through spending cuts as well as increased taxes. The Omnibus Budget Reconciliation Act of 1993 (OBRA 93), which was passed during the Clinton Administration, included increases to the tax on fuel, Medicare, and Social Security in addition to federal income taxes.
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:
- 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.
- 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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