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How Obama's tax plan may affect Long Islanders

BY RANDI F. MARSHALL | randi.marshall@newsday.com

November 9, 2008

On the morning after Election Day, the voice mails had already started.

Mitchell Zachary, a certified public accountant and certified financial planner in Lake Success, heard from clients across the income spectrum, wondering what Barack Obama's victory meant for their portfolios and pocketbooks.

"I've been hearing the end of the world is near," said Zachary, with Grassi & Co. CPAs & Success Consultants. "It's not the case."

Most experts across Long Island say it's far too early to know whether Obama's economic and fiscal proposals will become reality, especially with an economy in recession.

But some suggested Obama may be able to push through his fiscal and economic policy agenda, which focuses in part on reducing taxes, or keeping them the same, for those who earn less than $250,000 a year, while increasing taxes for families making above that level.

On Friday, Obama said economic conditions might prompt him to change this tax plan. "I think that the plan that we've put forward is the right one, but . . . we're going to be continuing to take a look at the data and see what's taking place in the economy as a whole," he said.

High costs on LI

If enacted, that income tax centerpiece of Obama's plan could hit Long Island harder than other parts of the country, since more residents here have higher incomes but also live in a high-cost area where property taxes, food, gas and other items eat up much of the weekly paycheck. According to best data available from the U.S. Census Bureau, 12.5 percent of households in Nassau, and 8.2 percent in Suffolk, make more than $200,000 - the highest income category the bureau measures. Nationwide, 4 percent exceed that income level.

"$250,000 on Long Island is not a lot of money anymore," said Sayville certified financial planner Jack Chite. "People on the cusp will get hurt."

Robert Certilman, 49, voted for Obama last week, even knowing that higher taxes were likely in store. The owner of Smithtown Acura, a Saint James auto dealership, earns more than $250,000 a year but said in the "long-run, it'll be better for the country" to have Obama as president.

Certilman owns a four-bedroom house in Syosset and is paying for his older daughter's college education, with his 16-year-old son not far behind. Meanwhile, his business profits are down 20 percent over the past year - and his investments are losing money, too. He worries that business could fall further if customers remain fearful of the future.

"I think there are a lot of people saying, 'He's going to raise taxes. Batten down the hatches,'" Certilman said. "In Ohio you're a rich man [with $250,000], but here, if your family income is $250,000 and you're doing what you need in Nassau County to live in a nice house in a good community and put your kids through college and save some money, it's really not a lot of money."

Other possible hikes

Zachary said a Long Island family earning $300,000 could pay about $1,500 more a year in income taxes under Obama's plan. Then there's his proposal to raise the tax rate on capital gains and dividends from 15 percent to 20 percent. He also has suggested applying Social Security payroll taxes to incomes over $250,000; currently, the payroll tax does not apply to income above $102,000.

But for those below the magic number of $250,000, Obama's proposals could help, Zachary added, since the their taxes either would stay the same or decrease. Obama also has proposed a host of tax credits for dependents, child care and college tuition.

"There are a lot of people on Long Island making $300,000, but the majority of people aren't," he said. "If the economy improves for most people on Long Island, if credit flows easier, if health insurance becomes affordable and accessible and if their taxes go down so they have a little more money every week ... that makes a difference."

Yet, experts including Arthur J. Lipman, a financial planner with First Capital Equities in Great Neck, say it's uncertain whether any of Obama's proposals will become law. "Just because he gets elected doesn't mean it's going to happen," Lipman said.

However, Plainview certified public accountant Stephen Valenti, said Obama has more of a chance to create new tax law than any president since Ronald Reagan, especially since he will have a Democratic Congress. The main worry now, Certilman said, is the unknown.

For now, Certilman said he is investing in his business and hasn't curtailed his personal spending. No matter what, he's expecting something in return - including lower deficits and cuts in unnecessary federal spending.

"I'm never living life to the edge and wondering where I'll get tax money from," he said. "I'll do my share but I'll be really disappointed if they're still paying $150 a hammer because then they're not doing their share."