By THOM SENZEE Contributing Reporter Local CPAs are gearing up for a new landscape of tax policy that should take shape beginning in 2009, and fully take hold in 2010 when the so-called Bush tax cuts expire. According to one local firm, the election of Barak Obama to the presidency of the United States marks a momentus shift in the universe of tax accounting. “While this doesn’t mean an immediate tax increase for most taxpayers,” a spokesperson for Grant Thornton said. “It does mean that the rules of the tax legislative game are expected to change.” According to a statement from the frim, the political sea change it believes Obama and a larger Democratic congressional majority represents, “could not have come at a more critical time for the tax code.” “A perfect storm is approaching in the next two years,” the company said. “The cost of fixing the alternative minimum tax (AMT) and passing the annual list of temporary tax provisions is becoming more expensive every year.” According to the firm, the outlook is changing for almost every area of the tax code. Tax cuts for wages and other forms of “earned income” may come at the expense of favorable treatment for capital income such as dividends and capital gains. But, partners at Grant Thornton do see positives on the horizon as they turn their eyes toward Washington in 2009. “New tax incentives for business will likely be structured to encourage the preservation and creation of domestic jobs,” they announced. “Any corporate tax reform is likely to be driven by the desire to preserve and increase domestic jobs rather than solely to allow U.S. multinationals to better compete on the international stage.” But the firm’s partners do not believe the election will change any of the fundamental problems facing tax planners and financial planners alike. In a word the underlying issue that makes the future uncertain is “deficits.” “Obama has clearly committed to the extension of the 2001 and 2003 Bush tax cuts for married couples earning less than $250,000 ($200,000 for singles),” Grant Thornton said. The firm doubts whether the Obama administration will have the ability to implement new programs ” without shattering existing deficit records ” unless the new president makes cuts elsewhere. One less-discussed potential of skyrocketing deficits is the possibility of higher interest rates, a development which Grant Thornton’s partners worry could further crowd businesses and individuals out of the credit markets. “President Obama and the Democratic Congress will face significant limits on the depth of tax cuts they can enact and may face pressures to use targeted tax increases as revenue offsets for initiatives in such areas as health care, education and energy policy.”
