Revenooer Rants: Obama’s latest tax increase proposals
Special to the Bonanza
In connection with the release of his latest “budget” (a contradiction in terms to say the least), the Big O has found his way clear, as usual, to suggest a few ways for we and thee to pay more.
Some of the highlights and lowlights:
• Increase the top capital gains and dividend tax rates to 28% for folks with income in excess of $500,000.
• Close the present estate tax “loophole” (Obama’s word, not ours) which allows for a step up in the income tax basis of assets inherited to the fair market value at the date of death. The result, of course, is that heirs will pay income tax on appreciated assets when sold, not to mention the estate tax they incur for the right to get their hands on those assets. Throwing a bone, Obama would allow that no tax would be due until the death of the second spouse in a married couple situation. Also, no tax would be due on inherited small, family-owned and operated businesses unless and until the business was sold, and any closely-held business would have the option to pay tax on gains over 15 years.
• Cut the top corporate tax rate to 28%.
• Permanently extend the Section 179 deduction to small businesses on up to $1 million of asset purchases. (Section 179 is the provision which allows an exception to the requirement of depreciation over several years of the cost of certain property purchases in lieu of immediate write-off in the acquisition year.)
• Limit the tax benefit of certain individuals’ itemized deductions to a rate of 28%. This provision would only affect couples with incomes over about $250,000 and single taxpayers with incomes of more than about $200,000.
• Prohibit contributions to and accumulations of value within certain retirement plans and IRAs once account values are about $3.4 million. (Nice savings incentive, right?)
• Impose the “Buffett Rule,” under which high income taxpayers would pay no less than 30% of income, after charitable contributions, in income tax.
• “Reinvest” in IRS “taxpayer services” to enhance taxpayers’ experiences in dealing with the Revenooers, such as by creating new online tax filing status and payment options. (We can hardly wait to see how this one will work.)
• Require professional service providers to pay self-employment tax on all of their income, in instances where such providers choose to operate as an S corporation.
And all of these wonderful provisions notwithstanding, Obama expects the Federal deficit to increase by about 20% in fiscal 2015! While IRS Commish Koskinen laments that “In regard to software, we still have applications that were running when John F. Kennedy was President.”
Let us all shed a tear…
— CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation. Jeff Quinn is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He can be reached at 831-7288, welcomes comments at email@example.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.
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Kelley R. Carroll, a certified specialist, handles estate planning and will contests in our office with the help of our firm’s litigation department. I do not handle any, be forewarned.