I spend so much time talking about tax reductions. It is time to address some of my more comfortable clients. As Barack struggles with the dichotomy of balancing the budget to pay for the stimulus packages and to ultimately get out of deficit spending, tax hikes for some become inevitable.  According to Hans Nichols of Bloomberg.com:

President Barack Obama’s first budget is accompanied by a promise to cut the deficit in half by the end of his first term even as billions in spending are added to stimulate the U.S. economy. …
Most of the savings will be realized by raising taxes on Americans making more than $250,000 a year and winding down the war in Iraq, the administration officials said. Obama will also propose letting Bush’s tax cuts for the wealthy lapse in 2010, according to a senior administration official who spoke on condition of anonymity.

Obama will also propose taxing the investment income of hedge-fund and private-equity partners at ordinary tax rates, which are now as high as 35 percent and may rise to 39.6 percent under the administration’s plan, according to the administration official. They are currently taxed at the capital-gains rate of as much as 15 percent.

Specifically, Obama proposes to let the Bush tax cuts expire for households making over $250,000. Marginal rates would climb back up to 39.6%. Capital gains taxes would climb back to 20%. And Obama would cap the value of itemized deductions at 28%, so that even taxpayers in higher brackets save no more than 28 cents tax for each dollar of deduction. According to Bloomberg News, this would mean an extra trillion in tax over the next 10 years.

These proposed increases won’t take effect until 2011. But they will start making news.  And as they do, we will continue to update you.

For those of you not threatened by the proposed hikes? Well, flat-tax fans can argue until they’re blue in the face that flat or consumption-based taxes would be easier and fairer. But the new administration has signaled a love affair with the sort of targeted tax credits that prompted former president Jimmy Carter to condemn the Tax Code as a “disgrace to the human race.”

I personally thank the Tax Code and its constant changing for keeping me gainfully employed during these trying times!