If you haven’t reviewed your 2010 tax return and 2011 tax planning strategy with your tax advisors, now is the time to do it.  Without even considering the possibility that Bush tax rules will expire absent lame-duck action, the Obama healthcare measures and the associated government mandates are likely to affect each and every one of us. 

Election night was about more than just election rhetoric, according to Bill Leary an MFR Director, who watched political posturing from inside the Beltway in D.C. for almost 15 years.  In nontechnical terms, the electorate is not happy.  Listening to the defeated Republican Senate candidate in Delaware, Christine O’Donnell, we hear a passion for resolving tax uncertainty and promoting small business.  She challenged Christopher Coons (D), to buck his party and advocate what is in the interest of those most affected by the tax law.  A concession speech suggesting “tax” compassion is unusual. 

In Kentucky, newly elected Senator Rand Paul (R), interviewed on CNN, said that increasing taxes was not an option because it could drag our economy into a depression. He indicated that a reduction in government spending is needed, not further taxing of the “rich.”  His plan for the Senate is a “Tea-Party” coalition.

It is clear that committee charimanships will change in the House of Representatives; good news for Montgomery County and Rep. Brady (R).  (Democratic House staff will be moving out of D.C., seeking alternative employment.)   Hopefully, the pressure will be on those facing election in 2012 to respond to the spirit of the people.  Voter dissatisfction in the mid-term election is not unusual for a President.  How President Obama will react is an important message for the public.

The newly elected representatives have no say in how the 111^th Congress will settle out, but we now know how the people have spoken. On Wednesday, President Obama, in a White House press conference, noted that voters were expressing displeasure with both parties. The president stated, “I think that part of the message sent to Republicans was, ‘We want to see stronger job growth in this country.” He noted that Republicans frequently push for tax cuts, regardless of the economic situation.  "From 2001 to 2009, we cut taxes pretty significantly," Obama said, "and we just didn't see the kind of expansion that is going to be necessary" to create jobs.

Obama also indicated that there should be bipartisan agreement on a plan to give businesses a tax break by letting them accelerate depreciation on some types of equipment.  He also mentioned a possibility of temporarily extending the Bush-era tax cuts.  Only time will tell how these possible tax breaks will play out.

To review your tax situation related to the political climate, please call our office at 713.622.1120.

For more information on the tax implications of the mid-term election outcomes, read “Tax Cuts to Dominate Lame-Duck Congress” in the Wall Street Journal.