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Low-income workers: More people would qualify for the earned income tax credit, the "negative income tax" for low-income workers. (See "A tax break that's worth the hassle.") The maximum amount of earned income used to calculate the credit would be raised, and the threshold at which the credit phased out would be increased. This is one of Obama's highest priorities and an almost certain winner.
Seniors: Senior citizens with incomes of less than $50,000 wouldn't pay any federal income tax. This one is possible but not probable. Passage will depend on the lobbying success of the AARP.
Deductions: Once your income reaches certain levels, you begin to lose your personal exemptions and part of your itemized deductions. (See "Get the most out of itemizing your taxes.") This phaseout of benefits was scheduled to expire but probably will be restored in some form for 2009 and 2010.
A family of four now in the 28% bracket would end up with a marginal rate of 32% instead, according to Charles Grassley, R-Iowa, of the Senate Finance Committee. Congress is spending money we don't have, and this is a backdoor way to increase taxes. Another probable winner.
For businesses
Job creation:- Businesses that hired employees in the next two years would be rewarded with a credit of $3,000 per worker. The American Jobs Credit is a probable winner, especially with the current jobs market.
- A payroll tax credit of $500 would offset the payroll tax on the first $8,100 of earnings. This one should have been implemented instead of the convoluted 2008 stimulus payments to help supercharge the economy. I'm rooting for passage.
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Alternative energy: Alternative-energy investment is one of the cornerstones of Obama's economic recovery plan. The permanent renewable energy production tax credit for research and development is also a winner.
Social Security: Currently, you and your employer each pay 6.2% on income up to $102,000, scheduled to increase to $106,800 in 2009. Obama's proposal would eliminate the cap for incomes above $250,000.
This proposal is highly controversial and would accelerate the conversion of the Social Security system from an insurance program to a welfare wealth-transfer program. This probably won't be passed until the Social Security funding crisis replaces the current economic collapse on the front pages of U.S. newspapers.
Remember, these are just proposals. They have to run the congressional gantlet before becoming law. And economic and political events will make them subject to modification and change. It was mere weeks ago, you'll recall, that a tax increase for the wealthy was assumed to be a certainty.
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Stimulus package winnersA current proposal for upcoming tax breaks could benefit homebuilders and investment banks. We can call this a reward for the reckless behavior that led to the crisis, Jim Jubak says.
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