A reduction in tax breaks or increase in rates means taxpayers will have less money to spend in the economy and it may discourage investing, said Bloomberg Government tax analyst Matthew Caminiti in an interview.

Investments are the main asset of the wealthy while for the middle class it's their home, said Edward Wolff, a professor of economics at New York University. The top 10 percent of wealth holders in 2007, the latest data available, owned 81 percent of stocks, Wolff said. "The preferential tax treatment of capital gains and dividends in the tax code definitely mainly benefits the rich," he said.

Congress also may take a "close look" at the tax benefits of municipal debt as soon as 2012, said George Friedlander, chief municipal strategist for Citigroup Inc. in New York. "If they actually get around to doing a bona fide cut in future spending then state and local finance will be on the table next year," Friedlander said.

Muni bonds generally are exempt from federal taxes as well as state and local levies for residents in most states where they're issued. For high earners and retirees seeking tax-free income any changes to the tax benefits of municipal bonds would be "impactful," said Christopher Johnson of the wealth advisory group for Barclays Wealth in New York.

Retirement Benefits

Proposals to cap tax incentives that encourage Americans to save for retirement are "short-sighted," Robert Reynolds, chief executive officer of Boston-based Putnam Investments, said in a statement yesterday. Reynolds urged the Massachusetts Congressional delegation to oppose any such policy shift.

"Those most severely hurt if savings incentives were cut would be low and moderate income workers who need help in saving for their futures," he said.

Limiting retirement benefits also may change strategies used by the wealthy, said Johnson, whose clients typically have at least $10 million in investable assets. Many high-net-worth individuals use accounts such as Roth IRAs to pass wealth down to their children, Johnson said. If such opportunities are removed, there will be a "rebalancing" toward whatever areas remain opportunistic, he said. "It's going to be difficult to anticipate in advance what those will be."

Make a Gift

The uncertainty means wealthy families should consider taking advantage of favorable gift taxes that are scheduled to expire at the end of 2012, said Linda Beerman, chief fiduciary officer of Atlantic Trust Private Wealth Management.