What follows is a VERY brief summary of the key issues that concern me and my clients, and ultimately, all of us.
The 2011 Budget Control Act established an agreed-upon deficit-reduction amount, but largely leaves specifics out. It is therefore difficult to know for certain what changes we will be looking at, but we do know that the Act puts major tax changes under consideration, and possibly social programs as well.
Personal income tax deductions/credits, and business deductions are back on the table for review by the special joint committee. Also, certain health programs (long-term care insurance & disability) that were slated to begin in 2012 may be abolished, if the committee follows the recommendations proposed by the "gang of six." Results: once again, such safety-nets as LTC and disability insurance will remain largely unaffordable for most Americans.
Additionally, the existing federal estate tax exemption, together with associated tax cuts that were enacted in December, 2010, are still slated to sunset on December 31, 2012, returning to exemption levels of $1 million, and a tax rate of 55%. Pair that with the proposed elimination of state tax credits, and you get a potentially horrific estate tax burden. Results: Many unsuspecting Massachusetts residents could be subject to both the Massachusetts (16-20%) AND Federal Estate Tax (55%) burdens, which could confiscate over 70% of gross estate, if they have not done proper estate planning!
I'll be watching carefully, because any changes in tax laws or health care reform programs need to be taken into consideration for estate planning, long-term care planning, and business entity formation/asset protection planning.