What Will Your 2013 Tax Rate Be?

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The 2012 election day for President and various state and local representatives is finally just around the corner. The Republican and Democratic parties dominate the ballots and today’s policy discussions.

Each party offers vastly different world views – in particular, on the issue of taxes.

Democratic Tax Platform – Key Points

•  Allow the Bush tax cut provisions enacted in 2001 and 2003 to expire for families making more than $250,000 (including income, capital gains and estate taxes):

o The 35 and 33 percent rates would increase to 39.6% and 36% respectively.
o Capital gains and dividend taxes would rise from 15% each to 20% and a filer’s personal income tax rate respectively.
o Estate taxes would rise from 35% to 55%. The exemption threshold would drop from $5M to $1M.

•  Extend the tax cut provisions for families making less than $250,000 (e.g., keep today’s tax rates as-is for families making less than $250,000).

Republican Tax Platform – Key Points

•  Extend the Bush tax cut provisions for all income levels (e.g., keep today’s tax rates as-is).
•  Eliminate taxes on interest, dividends and capital gains for families earning under $250,000.
•  Eliminate loopholes and deductions for higher income earners (assumed to be families earning more than $250,000).
•  Attempt to repeal the estate tax and alternative minimum tax.

The Republican party has the more tax-friendly platform across income levels. However, the Democratic party has a tax platform which economists believe is more likely to provide revenue to lower the deficit if Washington gridlock doesn’t get in the way.

Your 2013 tax rate is only one of several considerations in this year’s election cycle. Get informed, and vote wisely.