Deferral of Income  Future Tax Rates Federal budget  Income: 2009 Individual Income Taxes: $1,210 billion Social Security Taxes: $949 billion Corporate Income Taxes: $339 billion Excise Taxes: $69 billion Estate Taxes: $26 billion Tariffs: $25 billion Other: $24 billion Borrow: $400 billion to cover deficit

Deferral of Income  Future Tax Rates Federal budget  Expenditures: 2009 Social Security: $944 billion Defense/Terrorism: $660 billion Medicare: $408 billion Income Security: $360 billion Medicaid: $224 billion

Income tax rates  Trend has been down over last 25 years 1978 marginal tax rates MFJ  $47,200: 50%  $91,200: 60%  $203,200: 70%  Social security: 6.05% on first $17,700 Federal Reserve Bank study states income tax rates are likely to trend higher in the future  Alternatives: VAT???

Income tax rates  2011: End of “Bush Tax Cuts”? Marginal tax rates  Top rate goes from 35 to 39.6%  Bottom rate goes from 10 to 15% Capital gains tax rates: back to 20% Dividends taxed as ordinary income Child tax credit reduced from $1,000 to $500 Marriage penalty: standard deduction AMT exemption Phaseouts of itemized deductions and exemptions

Income tax rates  2011: End of “Bush Tax Cuts”? Alternatives  Extend all tax cuts for two years  Extend tax cuts for “non-wealthy” for several year

Deferral of Income  Section 179 Depreciable assets  Up to $133,000 in 2010  Can elect to expense some but not all of qualifying assets purchased Can alter taxable income by up to $133,000 every year after end of year

Deferral of Income  Retirement accounts Roth IRA conversion: pay tax in 2011 and 2012 Investment allocation  Equities Ordinary income Limits on capital losses  Mutual funds Distributions  Dividends  Capital gains Use ETFs?  Bonds Ordinary income  Real estate Limits on losses Ordinary income