As the presidential campaign pushes forward, there will be an increased focus on where the candidates stand on tax policy. While the specific details of each candidate's tax policy approach are still being defined, we are starting to see some basic positions established related to individual, investor and corporate tax rates. The table below includes current tax rates along with those suggested or discussed by the top three remaining candidates. The candidate's positions should become clearer following the national conventions this summer and as we approach the Presidential election this fall.
The next President will have an impact on tax policy, possibly as early as 2009 with most existing tax rates set to lapse in 2010 and 2011 and the estate tax being eliminated in 2010. In recent history, whenever there has been a change in the political party in the White House the individual income rates have changed by the first or second year of the new President's term.
|
|
Current Tax Rates |
Hillary |
Barack |
John |
|
Top Marginal Individual Income |
35% |
Raise the top rates; probably back to 39.6%. No change for "Middle class" |
Probably raise rates on the top 1%. No tax on seniors making $50,000 or less |
Leave as is with the top rate at 35%. |
|
Long Term Capital Gain |
15% |
Higher than 15% |
Probably 25% - 28% |
15% |
|
Top Marginal Qualified Dividend |
15% |
Higher than 15% |
Probably 25% - 28% |
15% |
|
Top Marginal Corporate |
35% |
No stated plan |
Opposes cuts and wants to close loopholes |
25% |
|
Estate Taxes |
45% on estates valued over $2M in 2008/$3.5M in 2009 |
Only tax estates with values over $7M at a 45% rate |
Only tax estates with values over $7M at a 45% rate |
10% rate on estates with values over $10M |
|
Other |
|
Numerous targeted tax credits for middle and lower income taxpayers related to caregivers, for individuals who save in a retirement account, and to those who make energy savings improvements. Creation of a government run 401(k) plan.
Raise Social Security taxes by increasing or removing the limit which is currently $102,000. |
Tax credits for certain middle and lower income taxpayers: |
|
If Senator McCain is elected there will likely be more of a status quo approach overall that is augmented with efforts to push through reductions in certain provisions related to corporate and estate tax rates. On the other hand, both Democratic candidates, in conjunction with a democratically controlled Congress, appear likely to move to increase tax rates at the upper end of individual bracket, long term capital gains and possibly corporate rates. However, both have also indicated a desire to lower estate taxes just not as dramatically as Senator McCain. In particular, Senator Clinton has suggested numerous targeted tax credits aimed at middle income taxpayers that might complicate our tax system. On the other hand, Senator Obama's plan appears more focused on low income taxpayers, again with many tax credits and the closing of corporate tax loopholes.
For example, a real estate developer whose income is dependant upon the disposition of appreciated assets or an individual with a diversified portfolio of mutual funds and marketable securities could see their federal income tax liability increase by two-thirds to more than double from today's liability.
Consequently, income taxes could receive as much if not more attention in many business transactions than since the pre Reagan years or arguably the 90's under President Clinton.