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Highlights of President-Elect Barack Obama’s Tax Plan

By Erik Folgate

Congratulations to Barack Obama for winning the office of the most important and powerful person in the world. He wasn’t who I voted for, but it is truly a historic time to be alive to see the first African-American president of the United States. I know that one issue many are concerned about when it comes to Obama is his tax plan. Here is a good snapshot from Kiplinger’s magazine about what he plans to do with taxes.

Tax-Plan Highlights

Income Tax
Maintain current tax rates of 10% to 28% for most Americans. Reinstate top tax rates of 36% and 39.6% on joint income of more than $250,000 ($200,000 for individuals).

Capital Gains/Dividends
Maintain maximum rate of 15% for most taxpayers. Boost top rate to 20% for investors with income of more than $250,000. Under current law, taxpayers in the two lowest income-tax brackets pay zero capital gains in 2008, 2009 and 2010. Eliminate capital-gains taxes on start-ups and small businesses to encourage innovation.

Retirement Accounts
Suspend mandatory distributions for those 70 and older. Permit taxpayers to withdraw up to $10,000 from retirement accounts penalty-free; withdrawals would still be subject to income taxes.

New Tax Cuts
Tax credit of up $1,000 to offset Social Security taxes for low-wage earners. Eliminate income tax for seniors making less than $50,000. Double the tax credit for college expenses to $4,000. Create a 10% mortgage tax credit for those who don’t itemize. Provide a $1,000 rebate funded by a windfall-profits tax on oil companies to offset high energy costs.

Maintain current exemption and index to inflation.

Estate Tax
Set exclusion at $3.5 million per person ($7 million per couple); keep rate at 45%.

Social Security
Maintain current wage base of $106,800, indexed for inflation. Impose additional tax of 2% to 4% paid by employers and employees on earnings exceeding $250,000 — but delay implementation for at least ten years.

Corporate Tax
Keep top rate at 35%; close corporate loopholes.

I am a little concerned that his plan to raise taxes on people making over $250k a year is that it will affect small business owners. Also, I am conceld rned that he might raise taxes on corporations, which would force them to pass that tax increase on to the consumer. But, he does have a good plan to help senior citizens and protect lower income earners, which will give them a chance to improve their financial status. However, remember that a $1,000 handout does nothing for you if you don’t use it wisely. If you continue to consume rather than invest and pay off debt, you will never get ahead with your finances. We need to remember that a new president won’t solve all of our problems. If you want to get ahead with your finances, it starts with you. Take the personal responsibility to make yourself a better person and better your financial life. Obama won’t make you wealthy, only you can make you wealthy.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • http://www.mytwodollars.com David

    Its not on $250K of business income, its $250K of business profits. You would have to make a lot more than $250K in business income to see any increase in income tax on your business.

  • author

    yes, but there are plenty of small business owners that make over $250k in profit. Obama threw out some statistic that it would be a very small percentage, but I disagree. Look at all of the professionals that own small businesses such as CPA’s, doctors, dentists, attorneys. Say what you want about some of these people, but they offer a service that is wanted and needed in their community and to penalize would be devastating to the economy, i think.

  • David

    I agree, but it still should be pointed out that its not tax on $250K in income, its $250K in profit. That definitely changes the dynamic of the plan by a lot of money and businesses, so being honest about the true plan is pretty important.

  • author

    I see your point. It can be misleading, and the republicans tried to spin it that way. I am not a big fan of Obama because I disagree with policy issues, but he’s our president now, and WE need to support him in every way to help him succeed. Because if he succeeds, we win.

    • http://www.facebook.com/dumbassmedstudent Mike Cutting

      I am sure the patrons of the Titanic supported their captain.

  • Bonecrusher

    Funny how oboma talked and none of these taxes happened. Who is really surprised?

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