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Next year, President Obama wants to reinstate the 20% R&D tax credit and make it permanent, adjust the alternative minimum tax for inflation, and reduce the corporate income tax rate to 28% from 35%. On the flip side, he has pledged to phase out the George W. Bush tax cuts on upper income Americans. This would increase personal income, capital gains, death and dividend taxes, especially for those in the top income bracket making $250,000 or more a year.

Governor Romney is advocating for tax reform that would lower the corporate income tax rate to 25% from 35%, reduce personal and capital gains and dividends taxes, while eliminating the death and individual alternative minimum tax. He has also stated plans to extend 100% expensing for all businesses for a year, so entrepreneurs are able to immediately recover their costs and reinvest in their business in 2013. He too, wants to make a 20% R&D tax credit permanent. Most importantly, he would not phase out the George W. Bush tax cuts.

Reality Check: Taxmageddon is coming to Main Street. Among the tax provisions scheduled to dramatically increase at the end of 2012 are marginal tax rates for individuals, the estate tax, capital gains, and dividend rates. These add up to an almost-$500 billion tax increase for 2013 alone. According to Chris Whitcomb at the National Federation of Independent Business, "Small business owners will be hit hardest because 75% of these concerns are pass through entities [i.e., LLCs, partnerships, sole proprietorships] that are taxed at the individual rate."

Here's how the uptick in tax rates play out: Obama's proposed personal income tax rate for the top bracket (approximately 24% of small business employers, according to a 2011 Treasury Department report based on 2007 tax data) in 2013 is 39.6%. If you add in the Medicare tax, the top rate hits 43.4%. On top of this, there are plans to raise the capital gains tax next year from 5% to 20% (23.8% with the Medicare tax), the death tax to 45% from 35% (with an exemption level of $3.5 million), and the dividends tax to a top rate of 20% from 15%.

  @FortuneMagazine - Last updated November 05 2012 03:37 PM ET
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