Back in October, as it became clear that Barack Obama would win the election, we started planning how to help our clients plan for the tax increases. Since then, the economy has fallen completely off the cliff. Taxpayers across America stopped worrying about potential Obama tax hikes and started worrying they wouldn't have any income to be taxed.
Shortly after the election, Obama discussed deferring tax increases to avoid squeezing the economy.Then last week, President Obama signed an economic stimulus bill offering nearly $300 billion in tax breaks (see previous blog entries). For a while there, it looked like raising taxes on "the rich" was just a political practical joke. (Unless, of course, you think jokes should be funny.)
Now Obama has begun releasing more detailed budget proposals. And now we're starting to see plans for future tax hikes -- tax hikes that will be costly either directly or indirectly to many taxpayer.Specifically, Obama proposes to let the Bush tax cuts expire for households making over $250,000 (to start with.) Marginal rates would climb back up to 39.6%. Capital gains taxes would climb back to 20% or even 28%. And Obama would cap the value of itemized deductions at 28%, so that even taxpayers in higher brackets save no more than 28 cents tax for each dollar of deduction. According to Bloomberg News, this would mean an extra trillion in tax over the next 10 years.
These proposed increases won't take effect until 2011 but we wanted to you to hear it from us first. We will be keeping you informed. Planning is going to be very important this year.
