CCH Details Candidates’ Tax Policies in Special Briefing
(RIVERWOODS, ILL., September 22, 2008) – CCH, a Wolters Kluwer business and a leading provider of tax, accounting and audit information, software and services has issued a Special Tax Briefing detailing the tax policies of the two major presidential candidates (CCHGroup.com).
“Newly elected presidents have a good track record for getting major tax legislation passed their first year in office,” noted Mark Luscombe, JD, CPA and CCH principal federal tax analyst. “Therefore, although many details of the candidates’ proposals are unclear, tax practitioners are anxious to learn as much as they can about their positions – and perhaps take advantage of planning opportunities between the election and the end of the tax year.”
The Tax Briefing covers a complete range of tax issues, from those affecting individual taxpayers to those affecting businesses and energy-related taxes.
“Many people know that Senator McCain wants to retain the tax brackets brought about by the Bush tax cuts, while Senator Obama wants to raise the top two brackets to their pre-2001 levels,” Luscombe noted. “Fewer may be aware of Senator McCain’s proposal to eliminate tax-free treatment of employer-paid health benefits, or Senator Obama’s proposal to enhance and make refundable the child and dependent care credit.”
McCain advocates the permanent elimination of the limitations on itemized deductions and personal exemptions for high-income taxpayers, while Obama proposes restoring the limitations after 2010. Both candidates favor the elimination of the marriage penalty and retaining the current $1,000 child tax credit past 2010. McCain proposes increasing the personal exemption for dependents (but not the taxpayer or spouse) by $500 each year until it reaches $7,000 in 2016, when it would be indexed for inflation; Obama has not discussed increasing the personal exemption amount.
Estate Tax Differences
Both candidates propose retaining the federal estate tax, which is currently set to be totally repealed for 2010, followed by a return to rates as high as 55 percent with an exemption of $1 million. McCain has proposed a top marginal rate of 15 percent and a $5 million exemption amount; Obama favors retaining the scheduled 2009 45-percent top rate and a $3.5 million exemption amount.
“It’s unlikely that Congress will let the full repeal of the estate tax take place as scheduled in 2010, so one candidate’s position or the other – or something in between – is likely to be put in place sooner rather than later,” Luscombe observed.
Candidates Differ on AMT, Capital Gains
Both candidates favor extending a “patch” – in the form of an increased exemption amount – that has kept tens of millions of taxpayers out of the clutches of the alternative minimum tax, or AMT. Obama proposes indexing the exemption amount for inflation; McCain would go further and “phase out” the AMT, but has not provided details of how the lost revenue would be made up.
Obama has proposed increasing the maximum tax rate on long-term capital gains to 20 percent – at least, for families with incomes greater than $250,000. McCain would maintain the current tax rates for capital gains at a maximum of 15 percent.
A Variety of Credits, Social Security Proposals
Obama has put forward proposals for new or expanded credits in a number of areas that McCain has not addressed. He would expand the “saver’s credit” and make it refundable to encourage contributions to retirement plans, and supports automatic enrollment in 401(k)s and similar arrangements. He proposes making the Hope Credit for higher education expenses fully refundable and increasing the maximum credit to $4,000. He proposes expanding the Earned Income Tax Credit to cover more families and increasing the maximum amount that married couples filing jointly can receive. He has proposed a new mortgage credit for non-itemizers of up to $500.
“Most of these proposals would benefit taxpayers at the lower end of the income scale,” Luscombe said. “However, the Hope Credit benefits many people who view themselves as middle class, and a wide range of people with relatively low mortgage balances could benefit from his mortgage credit proposal.”
Obama has also proposed a Social Security tax increase in the form of a 4-percent payroll tax on wage incomes of high earners – such as earnings over $250,000. McCain has not addressed Social Security funding, but has discussed alternatives such as personal accounts for younger earners.
Policies Affecting Business
The candidates have a variety of proposals affecting business, ranging from the corporate tax rate and depreciation to the tax aspects of energy policy.
McCain has proposed lowering the top rate from the current 35 percent to 25 percent. Obama has not settled on a firm number for the top rate. Both candidates want to broaden the base of the corporate tax. Both would make the research tax credit permanent; Obama would also expand the credit.
McCain has proposed a full first-year deduction for many types of business equipment purchased between 2009 and 2013, in the year it’s placed in service. Obama has not addressed small business expensing and depreciation.
McCain is in favor of repealing a deduction for “domestic production activities”; Obama supports repeal of the deduction as it applies to oil and gas companies.
Obama favors expanding and extending tax incentives for renewable energy and conservation while repealing incentives for oil and gas companies, as well as tax rebates to individuals to help offset the cost of home heating. McCain favors ending ethanol subsidies, has proposed a tax credit for zero emission vehicles and has discussed a federal gas tax holiday.
“Although their positions differ, neither candidate seems to endorse the status quo without reservations,” Luscombe noted. “No matter who wins the election, I wouldn’t be surprised to see some changes in corporate and energy tax policy.”
About CCH, a Wolters Kluwer business
CCH, a Wolters Kluwer business (CCHGroup.com) is a leading provider of tax, accounting and audit information, software and services. It has served tax, accounting and business professionals since 1913. Among its market-leading products are The ProSystem fx® Office, CorpSystem®, CCH® Tax Research NetWork™, Accounting Research Manager® and the U.S. Master Tax Guide®. CCH is based in Riverwoods, Ill.
Wolters Kluwer is a leading global information services and publishing company. The company provides products and services globally for professionals in the health, tax, accounting, corporate, financial services, legal and regulatory sectors. Wolters Kluwer has annual revenues (2007) of €3.4 billion ($4.8 billion), maintains operations in over 33 countries across Europe, North America and Asia Pacific and employs approximately 19,500 people worldwide. Wolters Kluwer is headquartered in Amsterdam, the Netherlands. For more information, visit www.wolterskluwer.com.
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