President Barack Obama’s tax proposal is changing the debate in Washington about corporate and personal taxes. Reaction is, so far, less partisan (though still very partisan) than much that has taken place in Washington since Obama took office in 2009.
Extending the cuts for the middle class–defined as the 98% of families earning less than $250,000 a year–would add $2.3 trillion to the Office of Management and Budget's (OMB) projected $10 trillion deficit in 2020, according to Tim Speiss, partner and chairman of EisnerAmper Personal Wealth Advisors. Extending the cuts to the 2% remaining, and highest-income, earners would add about another $1 trillion over 10 years, for a total deficit projection of $13.3 trillion.
The President proposed:
- Tax breaks for companies that create jobs in America rather than overseas
- A corporate write off for companies that invest in "plants and equipment" in 2011
- Additional infrastructure projects, and
- Making permanent the tax cuts (for those earning up to $250,000 a year (households)
Remarks by House Minority Leader John Boehner, R-Ohio, on Sunday, on "Face the Nation," were noted by media and politicians alike: "If the only option I have is to vote for those at 250 and below, of course I'm going to do that," he said, adding, "But I'm going to do everything I can to fight to make sure that we extend the current tax rates for all Americans."
Senate Minority Leader Mitch McConnell, R-Ky., on Monday,though, opposed any compromise, saying he would only support extending the tax cuts for everyone.
Boehner's comments led The New York Timesto opine on Tuesday that it was "refreshing to hear a Republican leader say that he could conceivably vote for any bill supported by President Obama." But The Wall Street Journalskewered the Republican leader on its Opinion page for his remark, saying he had "blundered into the tax trap" that Obama had set for him.
But the White House undoubtedly recognizes that any tax hikes will be met with opposition in a mid-term election year, with unemployment at 9.6% and the specter of a double-dip recession still looming. So what is the impact of this for advisors and their clients?
Andrew Rice, vice president and CFO with Money Management Services, Inc., in Birmingham, Ala., told WealthManagerWeb.comthat "if the Obama proposal allows businesses to write off 100% of equipment as a permanent tax break feature instead of just till end 2011, then we have different situation," than if the cut is only for 2011.