Until recently, it has seemed a forgone conclusion that the Bush-era tax cuts, set to expire at December 31, 2009, would in fact expire. Of course, those “tax cuts” included the reduction in the capital gains rate from 20% to 15%.
This is a complicated political issue indeed, especially since letting those tax cuts expire was a specific campaign commitment of President Obama. Bush tax cuts became something of a dirty word during the past campaign.
Political realities have set in. People have begun to recognize that “letting tax cuts expire” means the same thing as “a tax increase.” Economists and others have questioned whether now, with a clearly weak recovery in progress, is a logical time to have a tax increase at all. In addition, Democratic control of both the U.S. House and Senate is far weaker than most observers had expected. As a result, it looks like debate on at least a temporary extension of the tax cuts may begin before the midterm elections. A number of Democratic leaders are arguing for at least a partial extension.
It is impossible to predict the likely outcome of this process. This leaves business owners that were contemplating making decisions based on the timing of the capital gains tax increase (oh, I mean the expiration of the Bush capital gains tax cut) in a tough place.
That being said, given the ballooning federal deficit, it seems unlikely that tax increases won’t be on the horizon, even if an extension is passed this year, so a decision made based on the expectation of tax increases is probably safe, but they may or may not come at the beginning of 2011.
Making a decision based solely on anticipated tax changes isn’t how most people make decisions on the sale of a business, but it is certainly an important factor to consider.
Lawn | Landscape | Tree | Snow | Facility Services
Nationwide – Call 888-229-5740