Tuesday, June 02, 2009

How Stands the Greenbook with Congress? (A More Serious Look than Last Week)

Dean Zerbe of the Alliant Group weighs in with his projection of how President Obama's tax proposals will be viewed by Congress. Zerbe believes that indexing for inflation will continue and that the top two rates will not be increased in the short run (a side note: the present proposal may give the Republicans some ammo on the "marriage penalty" front). While the 0 and 15 percent rates for dividends and for capital gains will be continued, Zerbe expects the top capital gain rate to be increased, probably to 20%. Zerbe points out the advantages of the Interest Charge Domestic International Sales Corporation (IC-DISC) for small American businesses in international trade, saying that Obama has no plans to end this benefit in spite of European opposition and that tax professionals need to provide info on IC-DISCs and their advantages to appropriate clients. Zerbe believes that the 28% cap on itemized deductions will not succeed (more because of mortgage interest than charitable donation grounds and though there may be a $200,000 cap [$250K MFJ] for full itemized deductibility) and instead limits on employer-provided health insurance, especially for high-income taxpayers, will be used to fund new health-care initiatives. Finally, Zerbe fears that the Bush $3.5 million unified tax credit and 45% maximum rate for the estate tax will be incorporated for approximately the 2010-2012 period, with no clear guidance thereafter (shades of the year-to-year AMT patch).

Zerbe's commentary makes for interesting reading, though who knows whether his predictions will be more accurate than my predictions last fall. For the most part, Zerbe is not one who feels that Obama is totally out to gut the rich, though high-income taxpayers may pay a larger share than they have the last 6-7 years.


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