Washington, D.C.-With the hoopla of the Democratic and Republican National Conventions still reverberating throughout the country and the election less than two months away, Accounting Today will examine the tax plans offered by both Democratic nominee Barack Obama and GOP candidate John McCain as each vies to become the 44th occupant of the White House.THE OBAMA PLAN
Obama's bold proposals to streamline the tax reporting system could significantly reduce the workload of some tax accountants and push others out of business altogether, opine tax experts.
Under his proposals, income tax filings will be streamlined to the point that "millions of Americans will be able to do their taxes in less than five minutes," policy strategists for the Illinois Democrat said.
Obama's plan would require the Internal Revenue Service to use the information that it already gets from banks and employers to give taxpayers the option of pre-filled tax forms to verify, sign and return.
"Experts estimate that the Obama proposal will save Americans up to 200 million total hours of work and aggravation and up to $2 billion in tax preparer fees," Obama campaign officials maintained.
The $2 billion that accountants and other U.S. tax preparers figure to lose under Obama's streamlined filing plan could be partially offset by an increased demand for professional tax assistance among higher-income taxpayers.
Among other things, the Democratic standard-bearer has proposed not abolishing the Alternative Minimum Tax - the grueling provision of the current Tax Code that's causing nightmare-like complexities for increasing numbers of middle-income families - but, rather, to extend the current AMT "patch."
Obama also is pushing to repeal the Bush administration's 2001 and 2003 tax cuts - at least the part of those laws that gave relief to upper-income taxpayers. But in order to "protect tax cuts for poor and middle-class families," he has proposed limiting the rollback to taxpayers with incomes of $250,000 or more, as well as permanently extending marriage penalty relief and simplifying the Earned Income Tax Credit.
The scheduled reduction in the two top marginal income tax rates would be scrapped under Obama's plan for reform, and tax rates on capital gains and dividend income would rise to 20 percent. His plan also calls for the elimination of capital gains taxation for start-up businesses. He has also called for a permanent estate tax with a $3.5 million exemption and a 45 percent rate.
Further down the road, the Illinois Democrat plans to impose additional Social Security taxes of between 2 percent and 4 percent (combined employer and employee) on incomes over $200,000 ($250,000 for married couples).
He has proposed eliminating the oil and gas tax loopholes, as well as the loopholes in the tax deductibility of chief executives' salaries. To help eliminate the use of offshore tax havens, he seeks to create an international tax haven "watch list."
To encourage alternative energy, Obama wants the R&D and renewable energy production tax credits to be made permanent, and also to make the Child and Dependent Care Tax Credit refundable, thereby allowing low-income families to receive up to a 50 percent credit for child-care expenses. To promote savings, the Hope Credit match rate for college tuition of 100 percent would be extended to $4,000, and enrollment in 401(k)s and IRAs would be automatic.
Among his more immediate goals would be to create a new "Making Work Pay" tax credit of up to $500 per person, or $1,000 per working family, in order to "restore fairness to the Tax Code."
According to the nominee, this credit will completely eliminate income taxes for 10 million Americans.
He also is proposing to eliminate federal income taxes altogether for all seniors earning less than $50,000.
"This proposal will eliminate income taxes for 7 million seniors and provide these seniors with an average savings of $1,400 each year," campaign strategists said. "Under the Obama plan, 27 million American seniors will also not need to file an income tax return."
Next issue: John McCain's tax plans.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access