Taxes and Obamanomics
By Robert E. Baker, Jr., CPA, Partner, Budd, Baker, Beverly & Associates, PLLC
Well, we will soon have a new political administration, and with it, a new round of changes to the tax code. The 1996 election brought about the Taxpayer Relief Act of 1997 which introduced reductions in capital gains and estate taxes; the 2000 election ushered in changes through the Economic Growth and Tax Relief Reconciliation Act of 2001, bringing a significant overhaul to income tax rates across the board as well as sweeping changes to estate tax exclusions. And the election of 2008 will be no different.
Campaign promises and the reality of economic trends don’t always meet in the middle. However, the proposals that Barack Obama has promised, in some way, shape or form, should make it into the law books. These proposals have called for:
· Reduction of taxes on lower and middle income earners;
· An overall increased tax burden on the “wealthy”, those individuals making more than $200,000 per year, or for married couples, the threshold is $250,000 per year; and,
· Generation of additional income tax revenue from corporations through the closing of tax loopholes, elimination of tax benefits for businesses that move jobs overseas and increased enforcement on offshore entities and trusts.
Statistics show that only 3% of individuals will pay more taxes under these proposals.
If you are a low or middle income earner, you should see no changes in the taxes that will be assessed against your income. However, what you will see is a reduction in the taxes that you pay through provision of tax credits. These credits include a credit for working individuals, a saver’s credit for those setting aside money for retirement, enhancements to the child and dependent care credits and incentives for the purchase of fuel efficient vehicles.
But if you are a part of the “wealthy”, there is bad news…
- Your top tax brackets may jump another 3% - 4.6%. With the phase –out of personal exemptions and limitations on itemized deductions, your top tax bracket may exceed 40%!!!
- There is a proposal to assess a 4% surcharge on salaries exceeding $250,000 to supplement Social Security tax.
- The preferential tax rates for capital gains and qualified dividends will increase to 20%.
If all of this leaves you worried, it is time to call on the experts to assess the impact of changes in the tax code. We continue to work with clients to arrive at strategies to minimize the tax bites, especially in times like these. Call us today for a consultation. It is never too early to plan!
(December 15, 2008)
