The Texas and Ohio presidential primaries are dominating the news today, so we thought webd take a look at the candidatesb tax policies and see how they would affect S corporations.B B Webll start with Illinois Senator Barack Obama.

So would an Obama presidency be good for S Corps?B Herebs a quick summary of his positions and how they might affect Main Street.

Income Tax Rates:B Obama supports letting the top tax rates revert to their pre-2001 levels.B In other words, the top tax rate would rise from 35 back to 39.6 percent, the 33 percent bracket would rise to 36 percent, and the 28 percent bracket would likely rise to 31 percent.

Capital Gains and Dividends:B While the Senator initially indicated he would like to see the tax rates on investment income rolled back all the way to their pre-2003 levels, some campaign advisors are now suggesting that he would support some middle ground rates of around 25 percent for both dividends and capital gains.B Either way, he supports increasing rates on investment from current levels.

Estate Tax:B Obama has called for a $3.5 million exemption per spouse, and while he has been quiet on what rate would be applied to the remainder, the impression we have is that the law as it exists for 2009 — a $3.5 million exemption coupled with a 45 percent top rate — is probably close.

Social Security Taxes:B The Senator has come out in favor of raising the Social Security earning cap from its current $102,000 to an undisclosed amount to help make Social Security more solvent.B Under current law, workers pay Social Security taxes (12.4 percent) on the first $102,000 they earn and Medicare taxes (2.9 percent) on the rest.B The Obama plan apparently imposes the full combined tax (15.3 percent) on incomes above a certain level, perhaps $200,000.

Alternative Minimum Tax:B We canbt find any indication of what he would do about the growth of the AMT.

S Corp readers know that payroll tax issues are of particular importance to our members.B Some in Congress and the IRS would like to have payroll taxes apply to all S corporation income.B Combine that desire with an increase in the payroll tax wage cap, and youbre looking at a truly historic tax rate increase on thousands of small and closely-held businesses.

Even without payroll tax convergence, the economic plan outlined above represents a large tax hike on S corporations.B Right now, C corporations and S corporations pay a similar top marginal tax rate on their undistributed earnings — 35 percent.B Under the Obama plan, the rate for S corporations would rise to nearly 40 percent, while the rate on C corporations would remain the same.

Meanwhile, while public corporations are immune to the estate tax, a family-owned S corporation worth more than a few million dollars would be subject to estate tax rates as high as 45 percent when the business is transferred from one generation to the next.

On the tax cut side, therebs little in the Obama plan to encourage S corporations.B Rather than broad policies, he is offering instead a series of small tax credits for low-income workers, tuition expenses, a larger child tax credit, and a small savers tax credit.B He would also allow seniors to earn up to $50,000 before they have to pay taxes.

On net, tax policy under a President Obama would mean higher taxes for S Corporations, but not on their larger C corporation competitors.

Alternative Minimum Tax & the Candidates

Senator McCain favors of repealing it.B Senator Clinton wants to reform it.B And Senator Obama has yet to mention it (as far as we can tell).

What is it?B The alternative minimum tax, and together with the expiring Bush tax cuts, it presents Congress with the dominate tax policy challenge of the next three years.B This chart from the Tax Policy Center does a better job of outlining the AMT challenge than any words we could write.

With and Without Extension of Bush Tax Cuts

Simply put, absent change the AMT will take over the individual income tax, with most of the revenue collected by the federal government coming from the AMT.B Taxpayers most likely to get hit by the AMT include those with children and those that live in high tax states like New York and California.B Since S corporations pay their business tax as individuals, the growth of the AMT has particular importance to our members.

One interesting aspect of the current presidential run is that all three of the remaining viable candidates are members of the United States Senate and will have the opportunity to vote on many of these critical tax issues over the next few months.B Repealing the AMT is a $1.5 trillion challenge, so just how the candidates reconcile their other tax priorities with possible Senate votes to protect taxpayers from the AMT this session will be very telling.