How Obama’s Victory Will Affect Your Money – Guest Post
It’s always interesting hearing how someone in another land views American interests, especially after already touching upon the subject in my own way. This is a British perspective; seems we’re pretty close in interpretation.
Well, he did it. In one of the most closely called presidential campaigns in recent years, President Barack Obama headed off challenger Mitt Romney to enjoy winning his second term in the White House. But what does this mean for the average – or not so average – Joe? Here are some of the key points of Obama’s fiscal policies and what they could mean for you.
1. Education: In a stance the other end of the spectrum from Romney, Obama outlined in his budget that parents will be given the onus to make sure their children get a good education. In 2012, Obama received Congress approval for a tax credit for college students worth $10k to be paid over four years. He also wants to encourage jobs combining study and set up incentives to encourage colleges to keep tuition fees from rising. Teacher training programs will also be fiercely protected, with his Race to the Top initiative giving investment to primary and secondary sectors of education.
2. Taxes: Obama announced in 2012 that he wanted to put pressure on the wealthy in terms of raising taxes so that anybody earning over $200,000 has to pay 30 per cent of their income in tax. If you earn more than that, look forward to the highest two rates of tax rising again to 39.6 per cent. There are other tax cuts to benefit from though, including those set out as part of the health care law.
3. Jobs: In a unique bid to kick-start the fledgling economy, Obama is to allow community colleagues to team up with businesses to use college space as training areas for staff. If you’re a business owner, you could stand to save significantly on training costs. If you’re a small business owner and you’re one of the lucky individuals whose businesses are expanding, you could benefit from a tax break to write off business expenses if you hire or give your employees a pay rise. With Obama’s budget set to create 1.1 million jobs, job seekers should look forward to 2013.
4. Healthcare: The Affordable Care Act, gives tax credits to small firms offering their employees health insurance out of their own pocket. Obama plans to cast the net of this benefit a little wider to make sure at least 50 per cent of small businesses can take advantage of this. Going further than this, he wants small firms to be able to use group rates to prevent paying a whopping 18 per cent more for health insurance than big corporations. Some insurance premiums may go up though – by 2014, all health insurance companies must insure people with pre-existing health conditions. If you’re a member of the fairer sex, you’ll benefit from a health care reform that prevents insurance companies from charging you more based on your gender.
5. Business: If you work in manufacturing, you’re in luck. Obama’s planning to reduce the corporate tax rate by 25 per cent, meaning that you’ll pay 26 per cent tax in 2013. Alas, if you work in outsourcing and move jobs in your company abroad, you’ll have your cushy tax break cut but will get a new tax credit to shift your jobs back to the US.
6. Energy: To reduce the US reliance on oil from overseas, Obama is to focus instead of using different sources of energy – such as solar, nuclear and wind power.He aims to create over 600,000 jobs doing so, too. As part of this plan, Obama is encouraging Congress to give tax breaks to businesses that support ‘clean energy’. The reduction in importing foreign oil too could also save you, if you’re a car owner, a fair whack at the pumps.
7. The Deficit: Obama plans to cut the deficit by $4 trillion in the next 10 years, with some of that income coming from very wealthy American families. $607 billion is projected to be saved by the end of this financial year. $1 trillion of these cuts are part of the spending reduction plan that was formalized last summer. By cutting numbers in Afghanistan and Iraq over his first term, Obama plans to plow the saved funds into paying off the deficit – after improving infrastructure, airports and schools.
8. Retirement: If you’re retiring soon – or are already retired – you can breathe a sigh of relief. Obama is to stand against efforts to float Social Security on the stock market so it would essentially become a private business. Obama will also fight to keep benefits guaranteed and at current levels.
If Obama wants to finish 2012 and start 2013 as he means to go on, he will first have to navigate his way past the so-called fiscal cliff and broker a deal with Congress over the long-term budget. Starting 2013 by making $4 trillion in tax hikes over the next decade – which will happen if Obama can’t agree with Congress – may have serious consequences for the economy, which could make his plan tough to follow.
Mike Roberts is a partner in the British accountancy firm Taylor Roberts, which was formed in 2007 and is situated on the Wirral, in the north west of England. They provide accountancy, bookkeeping and taxation services to small businesses across the North West, including partnerships, limited companies and sole traders.