By Ken Berry
In the months preceding the national conventions, the presumptive candidates for their respective parties' presidential nominations - Democratic incumbent President Barack Obama and Republican challenger Mitt Romney - have sparred over taxes. Now that the gloves are finally off, both nominees have come out swinging full force.
Although you can expect each candidate to tinker with his tax proposals up to Election Day, and certain specifics are yet to be released, here's a side-by-side comparison of the opposing positions on a few critical issues, based on what we know right now.
Individual income tax rates
They're going up in 2013, barring any last-ditch effort from Congress to extend the current tax rate structure. For instance, the two highest 2012 rates of 33 percent and 35 percent will be replaced by top rates of 36 percent and 39.6 percent. The rates are reverting to 2001 levels before the "Bush tax cuts" took hold.
Obama:Make the current tax rates permanent for lower- and middle-income taxpayers. But those with higher incomes would be saddled with the scheduled higher rates. The increases would apply to single filers with income above $200,000 and joint filers with income above
Romney:Cut tax rates across-the-board by another 20 percent. Therefore, the top tax rate would be reduced to 28 percent, while the bottom rate would drop from 10 percent to 8 percent.
Capital gains and dividends
Currently, investors can benefit from a maximum 15 percent tax rate on long-term capital gains and dividends (0 for lower-income taxpayers). But these other Bush tax cuts will disappear next year. For 2013, the maximum long-term capital gains rate jumps to 20 percent (10 percent and 15 percent for lower-income taxpayers), while dividends will be taxed at ordinary income rates.
Obama: Retain the scheduled 20 percent rate for capital gains, but have dividends taxed at ordinary income rates only for single filers with income above $200,000 and joint filers with income above $250,000.
Romney: Extend the 2012 rates for high-income taxpayers, but exempt capital gains and dividends completely from tax for single filers with adjusted gross income (AGI) up to $100,000 and joint filers with AGI up to $200,000.
Under the health care law often referred to as "Obamacare", a 3.8 percent Medicare surtax applies to the lesser of "net investment income" or the amount by which modified adjusted gross income (MAGI) exceeds $200,000 for single filers and $250,000 for joint filers. Another 0.9 percent surtax applies to "earned income" (i.e., wages) above $200,000 for single filers and $250,000 for joint filers. These surtaxes take effect in 2013.
Obama: Preserve the health care law. Thus, the surtaxes would stand.
Romney: Repeal the health care law. Thus, the surtaxes would be eliminated.
Alternative minimum tax (AMT)
This "stealth tax" continues to wreak havoc on an unsuspecting public. If Congress doesn't "patch" the exemption amounts as it has done the past few years, millions of middle-class taxpayers will suddenly have to pay the AMT instead of their regular income tax liability.
Obama: Establish permanent adjustments of AMT exemption amounts.
Romney: Repeal the AMT.
Itemized tax deductions
Certain sacred tax deductions, like write-offs for charitable gifts and mortgage interest, could be on the chopping block in the future. As things stand now, many itemized deductions claimed by high-income taxpayers will be subject to a 3 percent reduction in 2013, although the overall reduction can't exceed 80 percent.
Obama: Limit itemized deductions for taxpayers with an AGI above $200,000. The maximum deduction rate for those in the highest tax brackets would be 28 percent.
Romney: No details released.
Corporate tax rates
The corporate tax rate structure, which features a top rate of 35 percent, hasn't changed in years. US companies have been complaining that this puts them at a disadvantage in the global economy.
Obama: Reduce the top corporate rate to 28 percent.
Romney: Reduce the top corporate rate to 25 percent.
Estate and gift tax breaks
A whole passel of estate and gift tax breaks, which have gradually increased over the last decade (including a one-year estate tax repeal in 2010), are set to expire at the end of 2012. One key provision permitting a generous $5.12 million estate tax exemption (indexed from $5 million), would revert to $1 million beginning in 2013. Also, the current top estate tax rate of 35 percent would return to 55 percent.
Obama: Restore estate and gift taxes to 2009 levels. The estate tax exemption would be 3.5 million and the top tax rate would be 45 percent.
Romney: Repeal the estate tax. The top gift tax would remain at 35 percent.
Some of these tax reform issues are likely to come into sharper focus as the candidates continue to refine their platforms. But you can be sure they'll keep fighting over taxes until the final bell rings.