Sidesteping the Obama Tax-Hike

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Registered: 02-19-2008
Sidesteping the Obama Tax-Hike
5
Tue, 03-03-2009 - 10:41am

It looks like professionals may seek to be less productive and avoid the Obama administration tax hikes on income over $250,000.

Doctors seeing fewer patients, hiring less staff, is this what we need? Class warfare has consequences.

http://abcnews.go.com/Business/Economy/story?id=6975547&page=1

Upper-Income Taxpayers Look for Ways to Sidestep Obama Tax-Hike Plan

President Would Slap More Taxes on Those Who Make Over $250K to Fund Health Care

President Barack Obama's tax proposal – which promises to increase taxes for those families with incomes of $250,000 or more -- has some Americans brainstorming ways to decrease their pay, even if it's just by a dollar.

A 63-year-old attorney based in Lafayette, La., who asked not to be named, told ABCNews.com that she plans to cut back on her business to get her annual income under the quarter million mark should the Obama tax plan be passed by Congress and become law.

So far, Obama's tax plan is being looked at skeptically by both Democrats and Republicans and therefore may not pass at all.

"We are going to try to figure out how to make our income $249,999.00," she said.

"We have to find a way out where we can make just what we need to just under the line so we can benefit from Obama's tax plan," she added. "Why kill yourself working if you're going to give it all away to people who aren't working as hard?"

The attorney says that in order to decrease her income she'll have to let go of clients, some of whom she's been counseling for more than a decade.

"This means I'll have to tell some of my clients we can't help them and being more selective in general about who we help," she said. "I hate to do it."

Obama's budget proposal calls for $989 billion in new taxes over the next 10 years, most of which will be earned from increased taxes on individuals who make more than $200,000 and from families who make more than $250,000.

The expiration of the Bush administration's tax cuts at the end of 2010 would garner an estimated $338 billion, $179 billion would come from the elimination of some itemized deductions for higher-income taxpayers and $118 billion would be brought in from a hike in the capital gains tax. The remaining $353 billion would come from taxes on businesses.

Dr. Sharon Poczatek, who runs her own dental practice in Boulder, Colo., said that she too is trying to figure out ways to get out of paying the taxes proposed in Obama's plan.

"I've put thought into how to get under $250,000," said Poczatek. "It would mean working fewer days which means having fewer employees, seeing fewer patients and taking time off."

"Generally it means being less productive," she said.

"The motivation for a lot of people like me – dentists, entrepreneurs, lawyers – is that the more you work the more money you make," said Poczatek. "But if I'm going to be working just to give it back to the government -- it's de-motivating and demoralizing."

Can Obama's Tax Plan Be Gamed?

Gary Schatsky, a financial adviser and the president of N.Y.-based Objectiveadvice.com, said that it is possible to successfully remove yourself from the bracket Obama plans to target in his new plan.

"It's very possible that there are plenty of things you can do with general tax planning techniques – attempting to recognizes loses, pushing gains to years when your income is lower and increasing retirement plan contributions – to come below $250,000," said Schatsky.

"But Obama's proposal has yet to be hammered out and the devil is in the details," he added.

Because we have a marginal tax system, said Schatsky, what Obama's plan means is that the amount of tax you pay on each incremental dollar is higher only when your income is pushed into a higher tax bracket.

"But to focus keeping your income below a quarter million dollars is not going to have any spectacular magic for individual tax payers," said Schatsky. "The difference between $249,999 and $251,000 will probably have zero tax impact."

Schatsky said that the incentive to get under $250,000 may be more so if the tax plan outlines that an individual who goes over a prescribed limit would face a reduced value of their itemized deductions.

"If the value of all your itemized deductions goes from a 33 percent level to a 28 percent level than there would be a reason for people to do dramatic things to reduce their incomes," said Schatsky.

Peter Morici, a professor of business at The Robert H. Smith School of Business at the University of Maryland, agrees that while it may be possible to sneak around the taxes, it won't be as simple as some may think.

"You have to be pretty close to $250,000 in terms of your income to get underneath it," said Morici.

Does Obama Tax Plan Promote Class Warfare?

Morici says that he believes Obama's tax proposal could spark a kind of class war.

"What Obama is doing is pitting the poor against the upper middle class," said Morici. "He'll tax the rich for the health benefits everyone else wants."

Obama has said the new taxes on those making over $250,000 would go toward a fund that would support a gradual move to universal health care coverage.

Avatar for claddagh49
iVillage Member
Registered: 07-20-2004
Tue, 03-03-2009 - 5:33pm
Maybe it would be better to pay for it with all the missing millions from Iraq.
iVillage Member
Registered: 01-04-2009
Tue, 03-03-2009 - 6:44pm

 

iVillage Member
Registered: 08-30-2002
Tue, 03-03-2009 - 9:42pm
These are not new taxes, these are simply taxes cuts that had Bush put into place that are expiring. I wonder if these people really started working harder when Bush gave them the tax breaks in the first place? Did they suddenly get a tax break and say, now I'm going to work harder because I can keep more. These Drs. really turned clients away UNTIL they got this tax break? Then they


iVillage Member
Registered: 03-18-2000
Wed, 03-04-2009 - 8:15am
More lame scare tactics.

 


Photobucket&nbs

iVillage Member
Registered: 03-20-2003
Wed, 03-04-2009 - 8:59am
Exactly.