As they say, the people have spoken, and Barack Obama will be our next president. I wish him well, and you should too, because he certainly has his work cut out for him.

Now, let s talk about what the Obama victory could mean for your taxes. The best way to approach this subject is to go over what I think are the most important elements of Obama s tax policy, as stated on his web site, and offer my opinions. Here goes.

Taxes on the Wealthy

The one Obama campaign pledge that I think you can take to the bank: to unwind the Bush tax cuts for the wealthiest Americans. Specifically, the president-elect wants to restore the top two pre-Bush federal income tax rates of 36% and 39.6%, which would replace the current 33% and 35% rates. I expect this to happen for the 2009 tax year. If you simply plug in the higher rates at the same 2009 taxable income levels that were scheduled to be taxed at 33% and 35%, you get the following results:

	Joint Filer	Single	Head of Household
36% rate begins at income of:	$208,850	$171,550	$190,200
39.6% rate begins at income of:	$372,950	$372,950	$372,950

If the 36% rate kicks in at these levels, which I think is likely, it might appear to violate Obama s promise to not raise taxes on married couples who make less than $250,000 or singles who make less than $200,000. However, tax bracket break points are based on taxable income which is always a good deal less than gross income. Obama could say the $250,000 and $200,000 thresholds he was talking about were based on gross income without being accused of dissembling.

What about the 39.6% rate? I think it could kick in well below the $372,950 taxable income amount shown above. While Obama has said he wants to restore the 39.6% rate, he hasn t been specific about the threshold where it will kick in. In this case, it's best to assume the worst.

Despite Obama's promises to the contrary, recent utterances from Vice President-elect Joe Biden and New Mexico Gov. Bill Richardson, suggest that the current 28% rate bracket might be increased to 31% for 2009. If that happens, expect the 31% rate to kick in at the following taxable income levels.

	Joint Filer	Single	Head of Household
31% rate begins at income of:	$137,050	$82,250	$117,450

In addition to pure tax rate changes, Obama also proposes to fully restore the dreaded phase-out rules that can wipe out all of your personal exemption deductions and up to 80% of most itemized deductions. These rules have been slowly vanishing in recent years, and were scheduled to completely disappear in 2010. Now, I expect them to come back with a vengeance for the 2009 tax year, beginning at the following adjusted gross income (AGI) levels.

	Joint Filer	Single	Head of Household
Personal exemption phase-out at AGI of:	$166,800	$166,800	$166,800
Itemized deduction phase-out at AGI of:	$250,000	$166,800	$208,500

If you think these phase-out rules are actually a disguised tax rate increase, you're correct. This is downright deceptive.

Tax Rates on Capital Gains and Dividends

Obama promises to leave the current taxpayer-friendly federal income tax rate structure on long-term capital gains and dividends in place for everyone except those in the highest two tax brackets. For this group, the rate would increase to 20% (up from 15%). Rumblings from at least one Obama economic advisor, however, suggest that the maximum rate might go as high as 28%. Whatever shakes out, expect it to take effect for the 2009 tax year.

Estate Taxes

Obama promises to permanently install a $7 million federal estate tax exemption for married couples. Presumably, the exemption for singles would be $3.5 million. Any excess would be taxed at 45%. This is basically the same deal that was already in place for 2009, and it s probably the best we could have hoped for -- even if McCain had won. Will the very-liberal new Congress go along? I hope so, but don t bet the house on it.

Social Security Taxes

Before the election, the 12.4% Social Security tax was scheduled to hit the first $106,800 of your 2009 wages or self-employment income. Income above the $106,800 ceiling would be exempt. (In the case of wages, half of the Social Security tax is paid by your employer, and the other half is withheld from your paychecks; self-employed folks pay the whole 12.4% out of their own pockets.) Obama says he will consider asking Congress to assess the Social Security tax on income above $250,000 at a rate between 2% and 4%, presumably without any income ceiling. While this proposal could prove to be quite controversial, it wouldn t shock me to see some sort of increase on high-income types as early as next year.

Taxes on Seniors

Read my previous column.

New and Expanded Refundable Tax Credits (Better Known as Welfare)

Obama proposes an array of new and liberalized refundable tax credits. These seemingly innocuous goodies are alarming once you understand how they actually work. Why? Because refundable credits are paid to you by the government even if you don t owe any federal income tax at all. So calling them tax credits is disingenuous. They are welfare payments -- pure and simple. This is another case of deception, which is why I think refundable tax credits are a terrible idea. In any case, here s a summary of what Obama has in mind.

Making Work Pay Credit: This is a refundable credit of $500 for working singles and $1,000 for working couples. Obama claims 95% of workers and their families would benefit. Apparently, this new credit would be over and above the existing earned income credit, which is also a refundable credit that Obama proposes to liberalize.

American Opportunity Credit: This is a refundable credit of up to $4,000 to pay for qualified college tuition expenses. It would undoubtedly be phased out for higher-income folks.

Universal Mortgage Interest Credit: This is a refundable credit to offset 10% of mortgage interest expenses for taxpayers who don t itemize. Apparently, the credit will be limited to lower and middle-income taxpayers.

Retirement Savers Credit: Obama would expand the existing retirement savers credit to match 50% of the first $1,000 of retirement account contributions for families earning less than $75,000, and he'd make the credit refundable.

Child Care Credit: Obama would liberalize the existing child care credit to allow low-income families to claim a credit of up to 50% of the first $6,000 of child-care expenses (maximum credit of $3,000), and he would make the credit refundable.

The Bottom Line

I could write a lot more about President-Elect Obama s tax proposals, but these are the most important ones for individual taxpayers. Frankly, the only things that give me serious heartburn are the restoration of the personal exemption and itemized deduction phase-out rules and welfare payments disguised as refundable tax credits. These should be highly objectionable to any fair-minded individual. If I were you, I'd start griping to my Congresspersons about them right now. And please stay tuned because everything you see here is subject to change. I will keep you posted.