The tax platforms of president Barack Obama and Republican challenger Mitt Romney could hardly be more different. With each camp painting postapocalyptic pictures of America's economy if the other side's vision become law, the election's implications for clients and advisors are as divergent as the candidates' tacks.

In a nutshell, the president is targeting top earners and wealthy families for higher taxes, partly to bolster social safety net programs amid stubbornly high unemployment and rising poverty.

Romney's approach is the exact opposite. Tax cuts-the touchstone of a smaller government and dynamic economic growth, he says-dominate his "Fairer, Flatter and Simpler" tax-policy slogan. In this worldview, taxation is little more than an institutionalized game of Robin Hood to be curtailed.

Both platforms have been sharply criticized. Obama is decried as the poster boy for big government and deficit spending. Even by taxing the rich, his 2013 budget proposal bleeds red ink in the trillion-dollar neighborhood.

Meanwhile, Romney's detractors say his tax-cutting plan benefits the affluent, hurts the middle and lower classes, and could enlarge the federal deficit despite his parallel goal to slash federal spending deeply, an action some say could trigger a recession and push joblessness still higher.

And both candidates have proposed quashing business tax breaks in return for lower corporate rates, although neither has offered anything to prevent Congress from reinserting exorcised preferences back into the tax code. "That's basically what happened with the simplification from the '86 tax act. That is always a risk," says Mark Luscombe, federal tax analyst at CCH Inc., a business-information publisher in Riverwoods, Ill.

The accompanying chart highlights some of the politicians' stances, bearing in mind their positions may yet evolve. Many of Obama's current proposals are little changed from his 2008 run against John McCain. For example, he remains committed to letting the Bush tax cuts expire for high-end earners. This includes reinstating the top two brackets at 36% and 39.6%, up from the current 33% and 35%, and charging these taxpayers a 20% rate on their long-term gains. No more preferential dividend treatment would be allowed, while itemized deductions would be limited and personal exemptions phased out.
Apart from the sunset of the Bush tax cuts, Obama also wants to limit the benefit of many tax breaks for this group of taxpayers to 28 cents on the dollar.

Who would get hit? Couples earning more than $250,000 and singles earning above $200,000 is what you might have heard, but it's not that simple. These figures are in 2009 dollars and would be indexed for inflation since then. That would jump the thresholds to approximately $260,300 and $208,250 if they were in effect for 2012. Additional adjustments would be made for certain items. For the nerdy details, see page 70 of the president's budget proposal, at http://www.treasury.gov/resource-center/tax-policy/Documents/General-Explanations-FY2013.pdf.

Obama's plan would change the taxation on the carried interests of private-equity managers and other high rollers from capital gain to ordinary income. He has advocated requiring million-dollar earners to pay a 30% minimum tax rate-the so-called "Buffett rule."

The president also wants to extend certain expiring or already-expired provisions. Those include above-the-line deductions for qualified tuition and teachers' classroom expenses, as well as the option to itemize state and local sales taxes instead of income taxes.

AGI = adjusted gross income. *Subject to indexing for inflation since 2009 (except for health care reform taxes) and other adjustments.
Sources: U.S. Dept. of the Treasury; mittromney.com; CCH Inc.; various news sources

A Different Drum
Romney seeks to cut Bush's historically low ordinary rates by 20%, thereby felling today's 35% top bracket and chopping it to 28%. He would simultaneously repeal the alternative minimum tax. Without repeal, "the AMT would reclaim much of the tax savings" from the rate cuts, according to the nonpartisan Tax Policy Center in Washington, D.C.

Regarding investment income, not only would the former Massachusetts governor preserve the current 15% rate on capital gains and qualified dividends for high earners (both are 0% for individuals making less than $200,000), he would extend the zero bracket to interest income. "He's also shifting to a higher threshold," says David T. Mayes, president and chief investment officer of Mackensen & Company Inc., a fee-only advisory in Hampton, N.H.

Joint filers with adjusted gross incomes below $200,000, as well as single filers under $100,000, would pay no tax on their interest, dividends and capital gains if the challenger had his way.

This landscape would mandate new approaches to investing. Municipal bonds would lose luster, for instance. Lower marginal rates render tax-free income less valuable, all else being equal, Mayes says.

For clients below Romney's threshold, paying no tax on investment income would make taxable accounts more attractive relative to traditional 401(k)s or individual retirement account. Without taxes on investment earnings, "a taxable account is much like a Roth account without the annual contribution limit," Mayes says.

But pledging to cut taxes means "it's probably going to cost someone some money," points out Luscombe, and so far Romney isn't saying who. "Romney has talked about spending cuts and eliminating tax breaks to broaden the base, but he hasn't specified the breaks he'd eliminate," Luscombe reports. It's speculated that the deductions for home mortgage interest and charitable contributions are on Romney's hit list. He could otherwise tamper with the earned income credit and child tax credit.

Estate And Gift Tax Proposals
In the transfer-tax arena, Obama wants to party like it's 2009. With one important exception, he seeks a return to that year's higher estate, gift and generation-skipping transfer tax parameters, namely a 45% rate for all three taxes, a $3.5 million estate and GST tax exemption, and a $1 million gift tax exemption, says estate planning attorney Steve Oshins, of Oshins & Associates LLC in Las Vegas. The exception is the spousal portability of unused exemptions, a goody Obama wants to preserve that came into the code with the 2010 tax act.

The president's plan, if implemented, would cause the estate-tax-free amount to decline from its current $5.12 million height. That would increase the number of estates owing death tax as well as the amount of tax they owe, which would also increase the need for estate-planning advice.

Romney's opposite goal of killing off the death tax once and for all might save the heirs of affluent clients a lot of money, but it could hurt planners' business by dampening demand for life insurance, valuation and trust services, and even charitable-planning advice, since gifts could decline. "Philanthropic giving is often driven from an estate tax perspective," notes CPA Blake Christian, a tax partner at HCVT LLP in Long Beach, Calif.

On Corporate Tax Reform
Some similarities actually exist between the candidates' corporate tax planks. Both wish to make permanent the expired research and experimentation credit, for instance, and both believe the corporate tax system desperately needs repair.

Currently, the U.S. uses a worldwide system that taxes U.S.-based multinationals' profits no matter where they are earned. However, the tax on foreign-earned income can generally be deferred until the money is repatriated to the U.S., says Christian. And therein lies the problem. This system can discourage domestic corporations from putting their foreign profits to use in America.

Furthermore, the current 35% top corporate rate is high for an industrialized nation. That hurts U.S. companies' competitiveness on the global stage, although a sea of tax breaks can lower the average rate actually paid-sometimes to zero, if not below. (Think GE.)

Agreement stops here. The incumbent wants to stick with a worldwide system and institute an unspecified minimum tax on the profits of U.S. corporations' foreign subsidiaries, even if those earnings remain offshore. To reduce that tax, corporations would be allowed a foreign tax credit for income taxes paid to the host country, Christian explains.

The idea is to make sure American companies pay tax on their foreign profits, even when their subsidiaries are located in low-tax or no-tax havens. By taxing foreign profits immediately, rather than waiting until they are repatriated, the U.S. system removes any benefits the companies have in leaving the profits overseas.

Obama also wants to deny businesses a moving-expense deduction for moving operations offshore. He has proposed a 20% tax credit for companies moving operations back to America.

To pay for lowering the domestic corporate tax rate to a proposed 28% (or to 25% for manufacturers), Obama would eliminate numerous tax breaks, including the last-in first-out (LIFO) method of inventory accounting. When the cost of goods rises, during inflationary times, for example, or when industries are susceptible to fluctuating supply prices, LIFO yields a larger write-off for the cost of goods sold, lowering current taxes.

Nixing LIFO would hurt select businesses immediately, such as oil and gas retail operations and grocers, according to Christian. "Down the road, this could be a big issue for a lot of businesses if we get into a hyper-inflation period," he warns.

Territorial
Like Obama, Romney is in favor of eliminating corporate breaks, although he hasn't specified which ones. But he seeks a lower tax rate, 25%. He also wants to repeal the corporate AMT.

Internationally, Romney prefers a territorial tax system where the profits of companies are taxed only where they are earned. "Many of our trading partners have territorial tax systems, and a lot of people, including some Democrats in Congress, think it would even the competitive game if we had a similar system," says Luscombe, but he adds that Obama sees this as rewarding companies to move operations overseas.

A related issue is what to do about foreign profits that American companies have been accumulating overseas. Romney has proposed a repatriation tax holiday without indicating whether corporations would pay a reduced rate or no tax at all on accumulated foreign earnings brought back home. Obama opposes a tax holiday.

The tax talk will be central to both campaigns as the contest heats up. Yet fiscal policy isn't the only variable that shapes the U.S. economy-something you can tell anxious clients.

"There are a lot of other things that matter, too," says economist Sung Won Sohn, a lecturer at California State University, Channel Islands. "Look at our stock market right now. It gyrates depending on what is going on in Europe, so whether taxes are raised or we have a tax cut, other variables could affect the outcome."