Proposition 24, which would have repealed several pro-business tax measures passed in recent years, looks to be a failure. Which brings up an interesting point: what will tonight’s results mean for your taxes?
- The Bush Tax Cuts are likely to stick around. Three weeks ago, the debate was if any of the cuts would remain, or they would all be allowed to expire. It was the second most frequently asked question of me this fall (first: what is the future of the estate tax?), and in all honesty, it’s hard to know what Congress will do until an election is over. Now, with the Republicans in power in the House, look for a number of new bills to start hitting the floor in the ensuing weeks. Given the Tea Party’s tilt toward fiscal conservatism, keeping the cuts looks to be a sure thing. The Dems may be able to reduce the amount of the credits, but it’s a good bet that many will survive largely as they exist today.
- There will be movement on the estate tax. Financial planners and estate planners have been wringing their hands looking for some direction from Congress in order to advise clients. I went to Washington in 2007 with the Illinois State Bar Association, and it was a topic of our discussions with Congressional and Senate staffs. Then, the prevailing opinion was that the tax would end up near the levels they were at in 2006-07, and not the 2009 or 2001 levels. A year later, and the theme was ‘wait until after the election.’ Everyone agreed that something would be done before 2010. As we all know, it wasn’t, so it will be interesting to see if Congress continues to wait, or if it takes action. It’s a good bet that there will be action.
- Look for the corporate tax rate to drop. Republicans have been trumpeting that the U.S. has one of the highest corporate tax rates in the world (if your name isn’t Google, that is, or Apple, or Oracle, or Zurich Insurance). Given the failure of Prop 24, it’s not a stretch to think that 1) Republicans will use rate cuts and other incentives to stimulate business investment, and with it, job growth, and 2) the public is ready for such a move. Expect the first bill to hit early next year, unless job loss claims begin to show significant improvement.
Check back here in a few months, and see how I did…
