President Obama proposed this week dramatic changes to the corporate income tax system. The key provision in his proposal is the reduction of the top corporate income tax rate from 35% to 28%. Obama’s proposal would provide for a favored tax status for U.S. manufactures to promote Made in America. This decrease in tax would be offset by eliminating many deductions. The total proposal would actually increase overall tax revenue. The plan would create taxes for US companies operating overseas by providing for a minimum tax on foreign earnings. The plan would also raise revenue by eliminating favorable deductions for the oil and gas industries as well as curbing other tax breaks. We normally don’t pay much attention to political … [Read more...]
Congress Passes Payroll Tax Holiday Extension
Finally! After many months of discussions, negotiations, finger pointing and even some name calling Congress has finally agreed to extend the employee-side payroll tax cut through the end of 2012. The House passed the Middle Class Tax Relief and Job Creation Act of 2012 on February 17, 2012. This was quickly followed by Senate approval. According to the Joint Committee on Taxation an estimated 170 million wage earners and self employed individuals will benefit from the 2% reduction in their share of the FICA tax. The White House figures that taxpayers on average will see a $1,000 increase in take home pay in 2012. This puts the great payroll tax holiday debate to rest for 2012 but what happens in 2013? … [Read more...]
Mitt Romney’s Tax Plan
Mitt Romney is currently the leading Republican candidate for President. We have laid out below Mr. Romney’s current plans for the tax system if he were elected President. At the individual level, exemption of investment income (long-term capital gains, dividends, and interest income) for most taxpayers with income less than threshold amounts ($200,000 for married couples, $100,000 for single returns and $150,000 for heads of households). We assume that all other income is counted first in determining whether investment income is subject to tax. Therefore, for any married couple with income from other sources above $200,000, all capital gains, dividends, and interest would continue to be subject to current tax rules. For taxpayers … [Read more...]
Obama Outlines Tax Proposal in “Blueprint for America”
President Obama unveiled his tax proposals during his recent State of the Union address recently. The package, according to the White House, is revenue-neutral. For individuals, President Obama has proposed the following: Extending the employee-side payroll tax cut for all of 2012; Enacting a so-called "Buffett Rule;" and Making permanent the American Opportunity Tax Credit (AOTC). The Buffett Rule would ensure that taxpayers making over $1 million annually would pay an effective tax rate of at least 30 percent. President Obama’s business tax proposals are a mix of old and new ideas. They include: Making permanent the research tax credit; Extending 100 percent bonus depreciation; Imposing a new minimum tax for … [Read more...]
New Tax on Investment Income in 2013
Historically, Medicare taxes have been imposed exclusively on income from earned income and not on income from investment activities. However beginning in 2013 investors may be subject to the medicare tax on investment income if their income exceeds certain thresholds, $200,000 for individuals and $250,000 for married couples filing jointly. The medicare tax rate is 3.8 percent. This 3.8-percent tax applies to the lesser of the taxpayer’s (1) "net investment income" or (2) the excess of adjusted gross income (AGI) over the applicable threshold. Example 1. Barry earns $400,000 as an employee while his wife, Michelle, receives interest income and dividends of $25,000. Their combined AGI, therefore, is $425,000, so the excess over … [Read more...]
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