Tax Lawyer's Blog

In an article written today by Mike Godfrey titled US Taxpayers Put Faith in Obama Tax-News.Com summarizes what the Obama victory says about American taxpayers: 

The subheadings are mine, the blockquotes are Godfrey’s:

American Taxpayers favor “wealth-spreading”

The economy and taxation formed a key battleground in the race for the White House, with the Republican candidate John McCain proposing to extend all of the temporary tax cuts passed under the Bush administration and cut corporate tax to 25%. However, it was Obama’s pledge to “spread the wealth” by increasing tax on the wealthy and large corporations to subsidise tax cuts for a large swathe of low- and middle-income America that helped win the day for the Democratic campaign.

American Taxpayers favor more, not less, Government Regulation of the Markets

Not surprisingly, most analysts on the free market side of the fence have argued that Obama’s plan will hinder the economy by increasing tax and regulation on the country’s wealth creators and expanding the role of government. Obama however, claims that his plan would reduce taxes as a share of the economy to the level that prevailed under President Ronald Reagan, at 18.2%.

According to Obama, much of this net tax cut can be financed by cutting unnecessary special-interest expenditures. But those who are at the top of the income pile, both wealthy individuals and large corporations, will also contribute through the termination of investment tax breaks and the closure of corporate tax ‘loopholes’.

American Taxpayers Want to Penalize Companies who Ship Jobs Overseas

For corporations and wealthy executives, the latest version of Obama’s tax plan proposes to: reduce opportunities for international tax planning, including reforming deferral to end the incentive for companies to “ship jobs overseas”; close the offshore pension loophole; close domestic tax loopholes by clarifying the economic substance doctrine and increasing reporting of capital gains, among other measures; eliminate special tax breaks for oil and gas companies, including repealing special expensing rules, foreign tax credit benefits, and manufacturing deductions; tighten tax rules governing CEO pay, and reclassify carried interest as ordinary income.

Obama’s plan also outlines how he intends to work with Congress to ensure that the Treasury and IRS “have the tools they need to close down the use of international tax havens for improper tax avoidance or tax evasion.” However, Obama has pledged to reward those corporations which play by these proposed rules and retain investment and earnings in the United States with a cut in corporate tax, although the precise nature of this cut remains unspecified.

American Taxpayers Want Tax Cuts for the Middle Class not for the “Wealthy”

For individual taxpayers, Obama intends to retain those aspects of the temporary tax cuts passed under President Bush which benefit families earning less than USD250,000 per year, but eliminate those which benefit wealthier taxpayers. Also, he intends to increase the top two income tax rates and restore capital gains rates to their pre-2001 levels for those on high incomes.

Obama has also proposed a raft of new tax credits to support low- and middle-income households. These include: a USD1,000 “Making Work Pay” Tax Credit; a refundable USD4,000 ‘American Opportunity Tax Credit’ to help with college tuition expenses; a universal 10% Mortgage Interest Tax Credit; Health Care Tax Credits; an expanded Earned Income Tax Credit; higher Tax Credits for Clean Vehicles; and a reformed Child and Dependent Care Tax Credit. Furthermore, retirement savings incentives will be expanded and tax will be eliminated for seniors making less than USD50,000 per year.

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