Taxpayers jittery about rate changes
The U.S. Senate is to vote today on a measure that would preserve current income-tax rates, a measure that has split Colorado’s senators even while bringing together President Barack Obama and Republicans.
It’s also one that has caught the attention of western Colorado taxpayers trying to figure out how to prepare for tax day.
“We’ve had quite a few clients call in and ask what they should do,” said Chris West, a certified public accountant and principal at Dalby Wendland & Co. P.C. “It’s made it a little more interesting this year not knowing where rates will be.”
Much of the focus on what West terms the “Bush tax rates” has been on income-tax rates, but many taxpayers also are concerned with the fate of the capital-gains rate, which was set under the Bush administration at 15 percent.
The 15 percent capital-gains rate, as well as the lower income-tax rates and an estate or “death tax” of zero, are to expire Dec. 31. The capital-gains tax would increase to 20 percent, and the estate tax would rise to 55 percent for fortunes greater than 1 million.
The 33 percent increase in the capital-gains rate “has a lot of clients talking about wanting to sell assets that have capital gains if nothing gets done,” West said.
One Colorado investor, billionaire Philip Anschutz, is poised to take advantage of the Bush tax rates while they remain in place.
Regal Entertainment Group, the largest U.S. cinema operator, declared an extraordinary dividend of $1.40 a share payable Dec. 30, the day before Bush rates expire. That will come to more than $100 million for Anschutz, who owns a controlling interest in Regal, according Bloomberg.com.
Anschutz isn’t alone in considering the implications of higher rates, West said.
Small-business owners also are “thinking twice” when it comes to hiring, West said.
Families with annual income of $250,000 or more could be looking at a “big cash crunch,” West said.
The fight over the Bush tax rates has centered largely on whether lower rates should be extended to those high earners.
An agreement reached between President Obama and Senate Republicans calls for the rates to be extended for all taxpayers. The deal also includes the extension of unemployment benefits.
Colorado Sens. Michael Bennet and Mark Udall, both Democrats, have split on whether to sign onto the deal.
Bennet said he can support it in order to aid the middle class, but he prefers to see higher rates for higher-income taxpayers. Udall said he won’t vote for the extension of the tax cuts to all taxpayers because he doesn’t support continuing the lower rates for upper-income taxpayers.