Tax Debate: Read My Lip Service

If Kerry wins the election, taxpayers with earnings near the $200,000 range might want to take some precautions this year. "Don't defer you bonus until next year," advised Ochsenschlager. "If you want to wear a belt and suspenders, take your bonus this year."

Dividends and Capital Gains

A major goal of Bush's tax reforms was to lower taxes that investors pay, on the dividends they receive from securities, and on capital gains when they sell their investments at a profit.

The 2003 act reduced dividends, a company's distribution of earning to shareholders, from a taxpayer's highest earned income rate to 15% for higher-income taxpayers and to 5% for those in the two lowest tax brackets.

It also lowered the taxes on gains of securities held long term, or more than one year. The tax was reduced from 20% to 15% for those in the top four tax brackets and from 10% to 5% for investors in the two lowest tax brackets.

In 2008, both the lower 5% dividends rate and capital gains rate will drop to zero.

But these tax breaks are temporary, and they revert to their pretax act rates in 2009, unless new legislation passes.

Bush has promised to extend these investment tax benefits if elected to a second term.

Kerry, however, has been silent on the subject of capital gains, according to Ochsenschlager of the CPA institute. He speculates that Kerry is probably planning to reverse the reductions as part of his pledge to raise taxes on the wealthy, "but hasn't spelled it out in the campaign."

A Kerry win could be a boost for municipal bond securities, said Thomas Doerflinger, an investment research senior U.S. equity strategist with Swiss financial services company USB (USB Quote). Municipal bonds, which generally give off income that is free of federal taxes and exempt from state and local taxes in the state of issue, have long been popular with investors seeking tax-free income.