Lessons and Tax Implications that Newly Licensed CPAs Can Learn from This Year’s Election
[Ed note: This morning we’re fortunate to offer a guest post from Grant Webb of Bisk Education, one of the nation’s leading providers of online professional education. Grant generally writes on the benefits of utilizing quality CPA exam review courses for accountants who want to become CPAs, but today, he reminds us of the sea of uncertainty facing the accounting industry resulting from the upcoming presidential election. For a comparison of the tax proposals of President Obama and Mitt Romney, click here… Now, on to Grant:]
Another election year means that it’s unlikely Congress will get much of anything accomplished before the election. Especially on issues that are as divisive as taxes and business regulation. Since we do not yet know who will be in office at the end of the year, it’s expected that many of these decisions will be made during the “lame duck” session (the last few weeks following an election before Congress adjourns).
Many Congressmen who either lost or did not run for re-election will be more inclined to vote from their conscience and those that did win re-election may make a riskier vote knowing they’re safe for another term. While this may work out great for those legislators running for re-election, it may not necessarily bode well for CPAs, the people and businesses. The lack of a clear direction on tax extensions, rates and deductions only complicates matters and makes it harder to plan financially.
The first big vote after the election will be whether or not to raise the debt ceiling. If last year was any indication, one can expect a lot of negotiation and 11th hour “backroom deals.” The next big vote will be on extending the Bush tax cuts, which expire at the end of 2012. Most Republicans want to extend these tax cuts permanently, while most Democrats want to let the tax cuts expire. If Republicans lose control of the House of Representatives, one can expect a vicious fight to extend the tax cuts. Most likely, both parties will concede and reach an agreement to extend some or all of the Bush tax cuts for a set period of time. A number of other tax cuts expire at the end of 2012, including the two percent Social Security payroll tax cut. CPAs need to stay informed during these crucial times.
Regardless of how the lame duck session turns out, the winner of the election will be able to dictate fiscal policy for the next couple of years. This all depends on which party gains control. If Congress remains split and the White House stays Democrat or goes Republican, you could expect to see a slow move in either direction. But if one party secures both houses of Congress and the White House, a slew of new policies could be expected that will impact CPAs and their clients.
Typically, if Democrats are in power, they will raise taxes and increase spending on social programs, while decreasing military spending. Republicans will lower taxes and decrease spending on social programs, but will typically increase military spending. This can impact clients in many ways, so it’s important to stay on top of the latest changes in tax law and financial planning.
No matter which party wins the election, there will be changes to tax rates, thresholds and some deductions or taxes may even be eliminated. This process can be the most cumbersome for CPAs that specialize in taxes and financial planning. Obviously, keeping on top of your CPE and the latest financial industry news is the best way to ensure that your clients are being presented with the best and most up-to-date information.
