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As the presidential election draws closer, understanding the tax policy of the major presidential candidates is important. Here are some of the differences:
Individual Tax Rates
Tax rates for 2013 are scheduled to increase for most rates with the top two rates going up the most. The top rate will increase from 36% to 39.6% and the next lower tier will increase from 33% to 35%.
Obama wants to keep the lower rates for all taxpayers EXCEPT for the “higher income earners,” which applies to single taxpayers earning over 200K or married filing joint taxpayers earning over 250K. Romney would reduce the current rates by 20%. Thus, the bottom rate would be only 8% from the current 10% but the top earners would get the most benefit.
Capital Gains and Dividends
Obama wants to increase the capital gains rate and tax on dividends from the current 15% to 20% and tax dividends at ordinary income tax rates for the higher income earners. Romney wants to continue the current rates on capital gains and dividends but exempt from tax on all capital gains, on interest and dividends for single people earning under 100K or married people earning under 200K
Alternative Minimum Tax
Obama wants inflation adjustments to AMT made permanent instead of waiting for Congress to act. Romney wants a complete repeal of AMT for all.
Obama wants to limit itemized deductions and other tax breaks for high income taxpayers. Romney hasn’t indicated which breaks he favors to be eliminated.
Estate and Gift Taxes
Obama wants a 3.5 million dollar exemption. Romney wants the estate and gift tax eliminated.
Corporate Tax Breaks
Obama wants to reduce the top corporate rate to 28% and reduce some corporate tax breaks. Romney wants the top corporate rate to be 25% and reduce some corporate tax breaks.
Bottom line, I like some of of the policies of each candidate. What bothers me is that cutting taxes won’t solve the deficit! This is the giant gorilla sitting on all of our shoulders and none of the candidates are addressing this. Moreover, cutting taxes for the top 2% is basically the “trickle down” theory, which states that if you cut taxes for the top earners, the benefits will trickle down to the rest of us through reinvestment. This theory has NEVER worked. If it did, there would have never been a French or Russian Revolution.