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Tax Planning 2008... and the Next Four Years


Purpose: What I think what will happen to high income taxpayers in the near future
and what you need to do now.

Executive Summary
See More Detailed Actions and Explanations Below

Capital Gains:  The current federal maximum rate for long term capital gains of 15% will increase to 20% or higher. This will occur as soon as 1/1/09 but not later than 12/31/2010. Actions: Sell or transfer in 2008 so as to incur capital gains at lower rates.


Ordinary income taxes: The current maximum ordinary income tax rate of 35% will increase to 39.5% and higher combined with phase outs of deductions. This could occur as soon as 1/1/09, but may be put off until 1/1/2010, but no later than 12/31/2010.  Actions: postpone deductions to use against higher income tax rates.  Plan to lessen ordinary income by using planning techniques.

Social Security/Unemployment Taxes: Currently FUTA and FICA stop at $102,000. This will be increased, probably to a higher level such as $150,000, causing a 14% tax increase for middle and higher income taxpayers. This is likely to happen sometime between 1/1/09 and 12/31/10. Social security will eventually not be paid to higher income earners who contributed to the system. Actions: shift out of earned income to more passive investments such as stocks and real property.

Dividend Rate: Presently at 15% federal and set to return to 39.5% on 1/11/2011. This will increase to some number between 20% to 39.5%, starting 1/1/2009 but before 12/31/2010.  Actions: Pay out dividends in 2008 from C Corporations and shift out of dividends producing investments to investments with growth or tax deductions.

Alternative Minimum Tax: The Alternative Minimum Tax (AMT) is the alternative tax you pay if your tax planning has substantially reduced your regular ordinary income tax.  In 2008, the temporary limits are now to $69,950 (married) and $46,200 (single).  The AMT will continue to be an important way to get taxes from you even when you use the available tax planning tools. Actions: Before any major transactions or planning, calculate the tax under the regular and AMT.  Consider using tax preference items in 2008.

Estate Taxes:  Individual exemption in 2009 is $3.5 million and the rate is 45%. Likely to retain $3.5 million exemption with a 55% rate which will go into effect 1/1/2009.  Actions: Your planning must assume there will be an estate tax.
Offshore: For asset protection and for global diversification, more people will establish offshore accounts.  There will be greater restrictions on the establishment of offshore accounts. Actions: Establish offshore entities before the end of 2008.

What I Think is Likely to Happen and What You Can do About it

Capital Gains

Status: The maximum current rate on long term capital gains on most assets is 15%. The current capital gain rate may be lower or higher than 15% depending upon a variety of factors. This 15% rate will expire on 12/31/2010. President Obama proposes to raise the capital gain rate to 20% on taxpayers with income over $250,000 (married) and $200,000 (single), but he desires to keep the lower 15% rate for incomes under $250,000/$200,000 and to eliminate capital gains on investments in small and start up businesses.  Given revenue demands, capital gains will increase for those below $250,000 and may go to 25% or higher.  If Congress does nothing, the maximum capital gain rate for everyone goes to 20% on 1/01/2011.

Predictions: Because the courts have sustained retroactive tax increases, the new rates could take affect January 1, 2009.   A middle of the year change is very messy for tax administration. A logical date for the increase would be January 1, 2010, after the recession, but passed in 2009 in enough time for memories to fade before the 2010 Congressional elections.  The complexity of determining the applicable capital gain rate will increase.  The rate will be graduated and could go to 28% or higher.

Actions: *If you have a major capital gain, take the gain in 2008, as this is likely to be the lowest rate you will have for many years.  If you want to retain the asset, but trigger a gain, such as for a business that you own, contact us for the methods by which this can be accomplished.
*The timing of loses is very complicated and specific to the individual. Consider postponing capital losses until 1/1/2009 when capital loses may be more valuable.
*Consider real estate: through 1031 exchanges, you never pay capital gain taxes. After the recession, there are predictions of the return of substantial inflation and the need to be in assets that will increase at the rate of inflation.
*Use highly appreciated assets for charitable gifts after the increase in capital gain rates.

Ordinary Income Tax Rates

Status:   The top margin rate of 35% is set to expire automatically and move to a maximum of 39.6% after 12/31/2010.  President Obama has proposed to increase the maximum rate to a maximum rate of 39.6% for families earning over $250,000.  The rate was 39.6% under the Clinton Administration.

Predictions: It is likely that the rate will increase to 39.6% in 2009, with a possible beginning date of 1/1/2009.  In addition, President Obama proposes to reestablish the phase out of personal exemptions and itemized deductions for taxpayers with income over $250,000 (married) or $200,000 (unmarried). This phase out could raise the effective rate for some taxpayers substantially above 39.6%.  The income level at which the maximum rate will be applicable will be decided in one of those 2:00 am mark up sessions.  Due to the large demand for revenue for new projects, expect that the maximum rate will kick in below $250,000 for families.  These tax rates will increase the motivation for tax reduction strategies and coupled with slow economic growth, may not produce the projected revenues, creating greater deficits than expected.  Because of the long term requirements for revenue, expect that this tax rate will be higher than in 2008 when you later take funds out of qualified retirement plans upon retirement.

Actions: *Postpone offsetting deductions until 2009.
*Consider using life insurance policies for the accumulation of wealth rather than qualified retirement plans. If you borrow on your insurance policies with cash value, the loan distribution is not taxable.
*Consider real estate investments where some ordinary income tax may be offset by deductions.
*If you own a business, consider establishing a captive insurance company to reduce business taxes. This can be a U.S. based captive insurance company.  

Payroll Taxes

Status:  Under current rules, earned income (money made from working, not investments) is subject to a 15.3% rate for Social Security (FICA), Medicare, unemployment insurance (FUTA) and related items. For someone who is self employed or who owns their own business, they effectively pay the 15.3% rate.  FICA in 2008 is on income up to $102,000, but the Medicare component of 1.45%, paid both by the employer and employee, and is not subject to such a cap. FICA is a flat tax that everyone pays at the same rate, except that the higher income earners actually have an effective lower rate if they have income above the $102,000. For lower income wage earners, most or all of the “taxes” they pay are payroll, not income taxes. President Obama proposes to give a tax rebate against the FUTA and FICA taxes paid by lower income people who pay little or no ordinary income tax; the persons receiving the these rebates will not lose any credits towards their Social Security account. This reduces total federal revenue available to fund the borrowing from the Social Security Trust Fund and offsets the regressive nature of payroll taxes.  President Obama has also proposed imposing FICA tax on income above $250,000 starting in 2018, when the social security system is predicted to require additional funding.

Predictions: The Social Security system runs out of money in the long run.  Social Security will need to increase revenue and decrease expenses. This problem may have been dealt with by obtaining higher investment returns on Social Security (done now in Chile), but this is strongly opposed by President Obama and the new Congress and will not happen for the foreseeable future.  I doubt that a $250,000 reinstatement of FUTA and FICA will be practical to implement due to the complexities of tax administration and the likely planning which will successfully avoid it.   A simpler approach would be to increase the $102,000 limit to $150,000 or some other number, which I expect to happen sooner rather than later.  When this happens, there will be technical legislation preventing the use of S Corporations to shift income from “earned” income to “unearned” income not subject to FUTA & FICA.  An increase of the $102,000 limit by $50,000 would have the effect of an about 14% tax increase or about $7,000 per year, a percentage increase that is greater than the projected increase of 4.9% in the ordinary income tax rate.  This means that the tax on “earned” income could be at almost a 55% federal tax rate, before considering state and local taxes.

Actions:  *Shift investment assets out of your business which produces earned income to investments that produce unearned income. These include stocks, bonds, and real estate.
*Bonus out this year capital reserves of your company and put into a separate account owned by an LLC you control and make loans to the business for capital needs and use the LLC to guarantee credit lines and bonding for business needs.
*Take a vacation and don’t work so hard when you pay a 55% rate.
*Abandon any plan to rely on Social Security for future retirement income because you will make too much money to be eligible.

Dividend Tax Rate

Status:  The current dividend rate is 15% for “Qualified Dividend Income” and this rate expires on 12/31/2010 when it goes to the same maximum rate of ordinary income tax of 39.6%.  The intent of making the dividend rate the same as the more favorable capital gain rate of 15% was to eliminate distortions in the market. Otherwise, with a capital gains rate that was substantially lower than the dividend rate, investors focused on capital gains from high flying dot.coms and away from businesses that actually produced income and profits. A 15% dividend rate reduces the double tax on earnings of C Corporations. President Obama proposes to raise dividends rates to 20% for taxpayers with income over $250,000 (married) and $200,000 (single).

Predictions: The 20% proposal of President Obama is a floor and likely to be exceeded and the higher rates will be on incomes less than $250,000/$200,000. Higher income people will pay higher dividend rates, either through a change in law or through phase out of the 15% rate under the Alternative Minimum Tax.  Although a majority of Americans own stocks and mutual funds, many middle income American may own mutual funds in their 401(k) where there is no tax on dividends paid to the 401(k) account. When these dividends are distributed out of the 401(k), these distributions from capital gains and dividends are all taxed at the ordinary income tax rate.  Therefore, raising the dividend tax rate will probably only increase taxes for a limited number of higher income taxpayers.  I have no certainty on this issue, but if I am forced to venture my best guess, I would forecast substantial increases in dividend tax rates. For future planning, you can no longer rely on a special 15% rate on dividends.

Actions:*For small business owners of C Corporations, distribute out retained earnings and pay the 15% rate in 2008.
*Consider returning to the investment strategy of choosing investments such as growth stocks and other non dividend producing investments or activities which provide offsetting deductions.

Alternative Minimum Taxes (AMT)

Status: The Alternative Minimum Tax (AMT) was designed to prevent a few millionaires from not paying any income taxes. These citizens so successfully implemented the legitimate tax breaks provided by Congress that these tax mavens greatly reduced their income taxes. Congress was embarrassed by this and said that if you really followed the tax breaks that Congress had enacted, then Congress would penalize you for so assiduously following the law by making you recalculate your taxes without getting the benefit of “tax preferences” enacted by Congress.  The complexity of the AMT calculation requires a computer and is beyond my goal of not putting you to sleep. Basically, you calculate your taxes one way and then you do the alternative (AMT) calculation, and if the AMT total is higher, you pay the additional amount determined by the AMT. If your AMT is less than your regular tax calculation, you pay your regular tax, not the AMT. The government wins either way. With increasing salaries and inflation, more and more Americans became subject to the AMT and started complaining to their Congressman or woman. A certain amount of income is exempt from AMT. Pre-2001, it was $45,000 (married) and $33,750 (single).  What happens is that Congress in recent years has raised the minimum by annual legislation so as to lessen the number of constituent complaints over the AMT. As part of the bailout bill, passed October 3, 2008, Congress raised the limits temporarily to $69,950 (married) and $46,200 (single) for 2008. The reason Congress does this on a temporary basis each year is that the amount of revenue loss per year is substantial and there is not sufficient revenue long term for a long term fix.      President Obama proposes a permanent fix to the AMT problem and pledges that middle and lower income taxpayers will experience a net tax decrease.

Predictions:  With the higher ordinary income tax rate, there may be fewer people where their AMT is higher than the ordinary income tax rate. The AMT is an ideal tool to make certain that higher income taxpayers pay a minimum level of taxes.  Given the overall lack of revenue for projected spending, I can not see how anyone can provide a permanent fix for this. Congress is likely to continue to make annual changes. The net trend will be to increase tax payments by middle and higher income taxpayers.

Actions:  *Use “tax preference” items under the AMT in 2008.
*Avoid use of tax preferences items in years you are likely to pay more tax under the AMT; do a calculation prior to major transactions.

Estate Taxes

Status:  The amount of your estate that is exempt from federal estate tax in 2009 will be up to $3,500,000, with a top rate of 45%. In 2010, there is no federal estate tax, but there are new laws reducing the advantages of the step up in basis (a nightmare for tax administration).  This expires on 12/31/2010 and on 1/1/2011, the exemption is only $1,000,000 per person, with a maximum rate of 55%.  President Obama has proposed a permanent $3.5 million exemption, with a 45% rate and making the exemption portable between spouses, and a full step up in basis for inherited property.

Predictions: Congress must act in 2009 to avoid a large decrease in revenue in 2010 when there will be no estate taxes under current law.  Congress will not repeal the estate tax.  The exemption will probably be $3.5 million and the maximum rate 45% to 55% percent. There will still be a step up in basis for inherited property.  The $1,000,000 exemption on gifts will remain.

Actions: *Assume a $3.5 exemption for planning purposes.
*Take steps to avoid estate taxes above $3.5 million. Through proper planning, most estate taxes can be avoided.


Status: There are no direct tax benefits to placing assets offshore. U.S. citizens are to report and pay taxes on their income earned anywhere in the world, whether directly or though LLCs, trusts or corporations. In fact, there are very strict reporting requirements and heavy penalties for failure to report offshore accounts. The major benefits of going offshore are: (1) to protect assets from court judgments and seizures, (2) to have access to global investments not available to U.S. citizens and (3) to diversify against currency risk and further deterioration in the economy, government and the fabric of American society.   The IRS states that a significant number of U.S. citizens engage in substantial illegal tax evasion through the hiding of assets and income and the failure to report or pay taxes on this income from offshore accounts, despite current heavy civil and criminal penalties.   We will not participate in any form or for any client participation in illegal tax evasion through phony offshore tax schemes. If you hear of a scheme to easily avoid taxes by going offshore, run away. Anecdotal evidence appears to confirm there is massive illegal tax evasion offshore. The increased tax rates will motivate further such tax evasion. There are proposals for a further crack down on offshore tax evasion.  

Predictions:  As part of the global competitive market, governments of countries compete for business with lower tax rates. The higher tax countries are trying to quash the competition from lower tax countries. Despite what the U.S. or any other government wants, countries will continue to compete as a superior place to establish a business. The global economy will continue to rapidly expand and be a bigger part of our lives. Congress passed laws protecting the small shop owners against the chain stores, but such laws did not stop the chain stores from driving out of business by lower prices, convenience and greater selection the mom and pops.   Several major investment houses recommend a 30% or more position in investments offshore. It is only prudent risk management to have a financial position outside of the U.S. given that most Americans have consistently stated to pollsters that the country is on the wrong track, assuming that there is wisdom in crowds. Securities and other financial regulation will tighten in the United States, which will drive more businesses to not want to sell their securities to citizens of the United States. To tap the growing number of investment products not available to citizens of the United States, you will need to have an offshore LLC, Trust or other entity that is not a “U.S.” person.  Due to the legitimate concern about offshore tax evasion by U.S. citizens, there will be substantial new legislation which will over reach and restrict the legitimate movement of funds and the establishment of entities offshore.

Actions:  *Set up an offshore LLC, trust of other entity in 2008 or as soon as possible before there are further restrictions.
*Never participate in any scheme involving offshore tax evasion.
*Hire experienced and competent tax preparers to comply with all government reporting requirements.
*Consider the legitimate use of offshore life insurance contracts and captive insurance companies as methods of wealth building, asset protection and legal deferral or avoidance of income, payroll, dividend, capital gain and AMT taxes.

Why I Think These Things Will Happen

As I am getting some gray hair and because I have had a lot of relevant experience, I believe it is my duty to give you my best judgment at to where federal tax policy is going and what you can be do about it now.   My judgment is based upon seeing changes in tax policies for 30 years, helping people plan their taxes for over 30 years, and assisting in almost a billion dollars of planning and transactions over the years. I served as a legislator in Virginia for ten years, where I ran and won five elections to the House of Delegates, and was involved in the formation of government tax policy. I worked for the City of Columbus, Ohio, the Ohio Attorney General’s Office, the Federal Trade Commission for five years in analysis of business and corporate structures and as a U.S. Army Officer in Strategic Intelligence Research and Analysis. I have a Juris Doctorate in law (with honors), a Masters in political science, years of post graduate training in wealth planning and have written several books, 60 plus articles and given and gone to more workshops and seminars than I can remember. I have been studying and thinking about these issues most of my adult life.  With all this, I don’t believe I know everything and most of what I discuss is based upon solid research of others and if you want to plow through the supporting documents, we will be glad to send them to you.

None of this is original with me. My most recent sources for data and analysis include Bernstein Global Wealth Management, the Heritage Foundation, Rob Slee and Wilmington Trust; none of these institutions or persons have reviewed or approved of what I discuss here.

Please remember how hard it is to predict the future.  My urgency is that I think there are things you should do before the end of 2008.

Trend One: Big Government Is Growing Bigger for the Known Future

One of the most questionable statements of former President Clinton was: “The Era of Big Government Is Over”.  Big government is growing at all levels and in the recent election, the people opted for more government programs.

Most Americans want more government services and checks from the government, but want to pay less through lower taxes.  My experience with voters is that voters are busy with their lives and do not want to dedicate the time to clearly think through whether what they want fits into a consistent set of policies.

Wanting more for less is not irrational.  In electronics and computers, consumers in recent years have gotten more for less. Worldwide, more people live the longest, have the highest levels of education, and have the highest standard of living in the history of the earth, with no new additional resources (except people and ideas) and where the population is the largest and most demanding it has ever been.

But, despite many efforts, several successful, to make government provide more for less, this will not succeed for three basic reasons: Fairness, Politics and Monopoly. Fairness: the government has to treat everyone with the same set of rules, even with a lot of exemptions, with a minimum amount of favoritism for insiders. Governments that cater to select groups, such as a monarchy or a communist bureaucracy, will and have been overthrown. Politics: With government, resources are allocated for public policy reasons (Who Gets, What, Where and When (V.O.Key)), and not according to market efficiencies. Monopoly: The government usually does not have the heartless, relentless, and unpredictable pressures of competition.   Government moves too slow to keep up the rapidly changing global economy.

Trend Two:  Federal Spending Has Increased Rapidly

“Under any plausible scenario, the federal budget is on an unsustainable path”-Peter Orszag, Director, Congressional Budget Office, December, 2007. The following refers mainly to federal government spending:

*Government spending has grown faster than revenues for five of the last eight administrations.
*The budget deficit 30 year average is 2.5% of Gross Domestic Product and is projected to grow to 18% of GDP by 2080 even with the expiration of the 2003 tax cuts and even if the AMT is allowed to take full force.
*Real federal spending has more than tripled since 1965 and has more than doubled since 1980, regardless of political party.
*Federal spending per household was at near an all time high of $23,494 in 2007 compared to $10,928 in 1965, adjusted for inflation and has more than doubled since 1960.
*Federal spending grew nine times faster than median income since 1965 and has increased 334% more than medium income by 2006, adjusted for inflation.
*Non-defense discretionary spending has increased steadily.
*Defense spending as a percentage of GDP was 5.5% for 1962-2007 and in 2007 was 4% of GDP.
*Federal spending is growing faster than federal revenue, from $628 billion of spending in 1965 to $2,730 billion in 2007, inflation adjusted, with an average annual deficit of $167.8 billion per year.
*Mandatory spending has increased almost five times faster than discretionary spending: 1965: Mandatory spending was 29% of the budget and by 2007 was 58% of the budget, inflation adjusted.
*Mandatory spending consumes a growing share of total spending: 1965, mandatory spending was 26.9% of GDP and in 2008, estimated to be 52.9%.
*Since 2000, the unfunded liabilities for Medicare and Social Security have tripled to more than $40 billion.
*Spending on entitlements as a percentage of GDP in 2005 was 8.4% and will grow to 18.1% by 2050.
*With the expiration of the 2003 tax cuts and no fix in the AMT, federal taxes will grow to unprecedented levels; but, even this tax revenue increase will not be enough to the funds future costs of the federal government after 2020.
*Total state and federal spending per household has more than doubled since 1965, inflation adjusted, from $16,410 to $37,544 in 2007.

Trend Three:  Spending is Likely to Increase under the Obama Administration

*President Obama proposes about $190 billion for stimulus of the economy. Recent reports are putting the figure at an additional $700 billion and a 2.5 million new jobs program.
*President Obama proposes additional programs with costs of about $344 billion, for those programs for which a cost could be estimated.
*Obligations incurred under the Bush Administration will have to be paid: Government actions related to the financial crises in 2008 produced an additional exposure of $2,635 billion with a budgetary impact of $240-$290 billion, not including the October $700 billion financial bailout package.
*Spending per household reached its highest ever level under the Bush Administration.

The federal government is running out of money even without new spending proposals and even with the scheduled increases in taxes. To have money for additional spending, there will need to be additional tax revenue.  This is the first time since 1960 that the Democratic Party has controlled both houses of Congress and the Presidency.  In recent years, spending and taxes has increased under Democratic administrations. Republicans have increased spending also. Rumors are circulating that the new Congress will abandon Pay as You Go, that is, pay for new spending with offsetting tax increases.  Will President Obama “rule from the center” and not follow through with large spending increases or “move to the left” and meet the demands of his constituencies for major public works, help for the cities, health care and other major spending initiatives? This will not be known after he takes office, because his coalition will fight over spending and taxation levels his entire term with one side or the other scoring victories in the continuing battles over spending and taxation.

Trend Four: Taxes Are Not Low and Are Already Disproportionately Paid by High Income Tax Payers; Lower Income Taxpayers Pay Substantial Social Insurance Taxes.

*Present federal tax receipts are close to the historical average of 18%.
*Federal tax revenue, inflation adjusted, has tripled since 1965.
*Social insurance taxes now account for 34% of all revenues. A large part of this comes from lower and middle income tax payers.
*The share of income taxes paid by the top 20 percent of income earners increased by almost 7% between 1983 to 2005 while the share paid by the bottom 20% of income earners deceased by almost 53%.
*The top 6% of income earners paid 59.7% and the bottom 50% paid 3.1% of total federal income taxes in 2005.
*Thirty Two percent (32%) of all tax returns paid no federal income tax in 2005.
*As a percentage of GDP, the highest tax burden in U.S. history was 20.9%, in 2000, during the Clinton Administration. It did not decrease much during the Bush Administration, where it was estimated to be 18.8% in 2008.

Trend Five: Taxes will Increase.

*The Clinton administration oversaw the highest percentage increase in taxes per household (25%) since 1960.
*President Obama has proposed tax decreases for some and increases for others.
*Most of the Bush tax cuts expire automatically 12/31/2010.
*With no change, federal tax revenues will grow to 25.5% of GDP by 2080.

Trend Six:  The U.S. Economy will produce less tax revenue and the expenses of governments will increase in the short run.  

We are the middle of watching General Motors, AIG and other household names experience meltdowns or in some cases, file for bankruptcy or dissolution. With lay offs, decreased spending by consumers and a recession, the revenues taken in by local, state and federal government are dramatically decreasing in the short term. At the same time, government expenses will increase with extended unemployment insurance, health care costs and additional deficit spending.

What is the long term capacity of the U.S. economy to fund the growing demands of the Federal Government? On the plus side, many major American corporations that are not in the news have plenty of cash flow to cover their debt, substantial cash reserves and a strong global market.  There is a historic opportunity to acquire these companies at very low prices compared to fundamental value.

The hidden long term discouraging outlook is for the privately held mid market companies, usually from $50 to $500 million in annual sales. According to Rob Slee, an expert and active seller and buyer of these companies, most of the mid market companies are not keeping up with changes in the global market and do not have a strong long term future. This is a huge problem for the U.S. because these mid market companies usually account for about 80% of the new jobs.  If these mid market companies do not learn how to beat their global competitors, the creativity and vitality of American business may largely disappear in the next generation.  Many jobs (even professional work) will be continued to be outsourced. If we are to maintain our American standard of living, we must act smarter than our international competition.

Trend Seven: More People are Dependent on the Government.

*The Heritage Foundation Index of Government Dependency has grown from less than 10% in the 1960s to up to 70-89% for all areas of payments by 2007.
*The number of people in the Index of Government Dependency went from 2.17 million in 1962 to 58.7 in 2007.
*Per capita income from Dependency Related Programs, adjusted for inflation, went from $6,437 in 1962 to $25,974 in 2007.
*The number of people participating in government programs or as government employees went from 33.6 million in 1962 to 82.4 million in 2007.

Is the Future Doom and Gloom or Good Morning in America?

It is said that Americans have over consumed, under saved, over borrowed, over ate, under adapted to technological changes, have excessive production costs and a new generation that does not want to work as hard as their grandparents.  Most Americans think the country is on the wrong track.  Some observers think that the percentage of people dependant upon a government job or check has reaching the tipping point, producing a voting block that wants to vote for more money to be taken from other people’s pockets. There are those who think that we are on a decline from which we will not recover. If that is true, expect more government spending and even higher taxes.

I have faith in the American people that we will face this challenge, change our ways and come out on top.  But, a prudent person engages in risk management by moving some assets into offshore investments in case we do not surmount these challenges.

Don’t Watch Tax Legislation if you have a Queasy Stomach

A well worn quip is that if you have a queasy stomach, you will not be able to watch sausage and legislation being made. For tax policy, the general goal has been to be “revenue neutral”. This means that if there is a tax cut or spending increase, the estimated loss of revenue or increased spending must be made up by an offsetting tax increase. My image is that at two o’clock in the morning, when the conference committee is putting together the final terms of the new tax bill together, they have to “find” $43 billion to offset what they have done, so they raise some other taxes that are questimated to come up with the $43 billion in new revenue. The result is that you do not know what the new tax rates or provisions will be until the new tax law is signed by the President and after the follow up “technical corrections” legislation which usually follows major new tax legislation.  I am glad to receive any feedback, whether positive or negative.  Schedule a conference with our team to plan under the coming new tax rules.

Circular 230 Notice

Pursuant to recently enacted U.S. Treasury Department Regulations, we are now required to advise you that, unless otherwise expressly Indicated, any federal tax advice contained in this document, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed in this document.

P.S. Everything I talk about in this letter depends upon your individual situation, risk tolerance, political persuasion and your view of the future.  Do not take any actions without prior consultation with an appropriate team of professionals.

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