Now that the election is behind us and we have a Democratic President, House & Senate we can begin to speculate how this political climate will affect the estate tax or death tax as it is commonly referred to.
During the campaign there was much talk about eliminating the “Bush Tax Cuts” and “Redistributing the Wealth”. This leads me to speculate that the new administration and congress may return the estate tax to it’s prior levels of a maximum tax rate of 55% with a credit of only $1,000,000. This step would promote the ideas put forth in the campaign and provide additional tax revenue for all of these projects Mr. Obama wants to promote.
For the rest of us hard working entrepreneurs, it could mean disaster without proper planning. Lets first look at what’s included in the “Estate”: all of your assets, including real estate, businesses, personal effects, cash and accounts, and one people often forget, life insurance. For many of us it is life insurance that will put us over the top on estate tax. Ironically, life insurance is one of the best and easiest tools to combat this potential shift in the death tax. Through the use of Irrevocable Life Insurance Trusts we can reduce or eliminate the estate tax burden on our families. Please go to www.dickersonlaw.com/inforequest.html for more information on life insurance trusts. Or contact me at 956-791-5422 or by email jmd@dickersonlaw.com
November 10th, 2008
This is the first year that many of us have dealt with the new Texas Franchise Tax, a.k.a. the Margins Tax. The tax on its face sounds innocent enough, just 1%. The reality as many of you have come to know is that this 1% is of your gross revenue with very few deductions (employee costs or cost of goods sold). As a result, it is possible to have a loss in the business and still have to pay the franchise tax. It has happened in certain service industries like transportation and forwarding. Some industries received some breaks, including retain, physicians and lawyers. The original purpose of the change was to bring all business entities under the tax. (Limited Partnerships and others we excluded under the prior law.)
Unfortunately as with most things the pendulum has swung to far and will need to adjust (hopefully sooner than later). I have some ideas on fixing this problem but I would like your input and comments. I intend to put together a simple plan provide revenue for the government that is equitable, without becoming an burden unfair burden on businesses.
As for my thoughts I suggest that the tax focus on the net income for the business for federal tax purposes. By doing this we can simplify preparation of the tax returns for the included businesses and allow all industries to be treated on equal footing. This will remove any bias for one industry or another, because the net amount is what is being taxed. I would also recommend a flat tax rate that would start after the first $300,000 of net income for federal tax purposes.
These are just some of my preliminary thoughts, I welcome and encourage you to comment on this blog. Your feedback is important to me. I may include your ideas or thoughts in my letter to Governor Rick Perry and the Texas Legislature. (Your anonymity can be assured is you like.) You can email me at jmd@dickersonlaw.com.
Until Next Time.
July 30th, 2008
