Mr Robin B Tucker www.nwyc.com   Fiscal Drama Part 2   Now that the election is over, Congress will begin to address the haze of tax issues and we will see how the tax writers are planning to deal with the “fiscal cliff”, along with a host of other issues that involve our economy. What happens next? What are the choices? President Obama has outlined two options: (1) extend the expiring breaks for those below a certain threshold of income and postpone, or slow, the government cuts, or (2) allow all the tax breaks to expire and the full government spending cuts to begin. In reality, there is another possibility which is to avoid the year-end time pressure by extending for one year all the expiring tax breaks and spending cuts in order to work out a true balanced reform-based approach. While allowing for more debate, it also allows for uncertainty to continue. What we know The uncertainty surrounding our deficit and tax rates has cast a shadow on private investment and spending because the business community, small business in particular, is not confidant about consumer demand for their services. Uncertain demand leads businesses to curb spending. The Bush-era tax cuts, all of them, are set to expire, and mandatory government spending cuts are scheduled to begin in 2013. Add the recent election to the mix and you have an uncertain environment for taxpayers. Tax Rates and Bush-era tax cuts for 2013 It is likely that a portion of the Bush-era tax cuts will be extended for some, and there is no guarantee that tax rates will not rise for others. President Obama’s comments as Congress reconvenes calls for $1.6 trillion in additional taxes over the next 10 years which is much higher than the $800 billion the Republicans were willing to ask for in the last years of negotiations. There is a clear message that the President intends to push for ending the Bush-era tax cuts for those making over $250,000 (joint), including capping itemized deductions at 28%, phasing out other personal deductions and reinstating the higher tax rates of 36% and 39.6%.   Other targets The White House has openly called for elimination of oil, gas and coal breaks, a reform of the U.S. International Tax System and Financial Services products, as well as modifying the estate rules to subject more income to the estate tax. 2012 business equipment While little mention has been made of business tax breaks, many issues remain unresolved. It is difficult to plan for business purchases without knowing the exact amount of any write-offs. Speculation exists that Congress will retroactively increase the 2012 “expensing” provision from its current level of $139,000 to $500,000, as well as possibly addressing bonus depreciation, which is at 50% for 2012. The probability that such action will take place is seen as high. Stock and dividend transactions Capital gains and dividend rates are expected to rise in the near future. The 15% tax rate on this type of income is valid through year-end. President Obama has been open about his desire to see this amount rise to 20% for capital gains. He also wants to remove altogether the preferential rates for dividends. NWYC Polls: Which Tax Will Affect You the Most? (Click Here) Should the Bush-era tax cuts be extended? (Click Here)   The information contained herein is general in nature and is not intended as legal, accounting or tax advice or opinion as provided by National Write Your Congressman. The reader should seek professional guidance prior to taking any action based upon this information. National Write Your Congressman shall have no obligation to inform the reader of any changes in tax laws or others which may affect the information provided. Thank you for being a responsible American; your voice is making a difference.