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An Overview of Presidential Hopeful Joe Biden’s Tax Plan for the US

Presidential Hopeful Joe Biden’s Tax Plan for the US

During the past several weeks, Democrat presidential candidate Joe Biden’s tax plan for the country has hit the headlines, both receiving praise and raising plenty of concerned eyebrows.

Here’s a very quick summary of Biden’s plans for US taxation.

Real Estate

Biden’s plan calls for increasing taxes on real estate investors that make more than $400 thousand in income by getting rid of the 1031 swap that lets them exchange investment property for other similar ones.

Capital Gains

Currently, the capital gains tax is 20 percent for single households with incomes above $441 thousand or $496 thousand if married and filed jointly. Biden’s plan is to start considering capital gains as regular income for those households making more than $1 million.

Furthermore, Biden will modify Trump’s Tax Cuts and Job Act by raising its 37 per cent ordinary income rate to 39.6, largely affecting those individuals paying the highest capital gains rate or people who sell their business and move above that newly established $1 million threshold. 

Corporate Tax

In terms of corporation tax, Biden will raise the rate applied to American C-corporations from the 21 percent mark set by Trump’s Tax Cuts and Job Act to 28 percent.

Likewise, Biden plans on establishing a minimum corporate tax rate of 15 percent for companies making more than $100 million per year.

Social Security Taxes

As for social security taxes, Biden’s proposal will not tax any income between $137 thousand, the limit now, and $400 thousand and will apply a 12.4 percent social security tax to be covered by both individuals and their employees on those raking in more than $400 thousand.

Qualified Business Income

Another reform planned by the democrat presidential candidate is the elimination of the Section 199A 20% business deduction made available to sole proprietorships, partnerships S-corporations and real estate investment trusts as part of Trump’s 2017 tax reform and currently applied against income from a qualified trade or business.

Itemized Deductions

Biden also hopes to eliminate the itemized deduction policy established by Trump’s Tax Cuts and Job Act.

According to the National Law Review, a Biden administration would “[restore] the pre Tax Cuts and Jobs Act limitation on itemized deductions for taxable income above $400,000,” which in the past “capped the amount of itemized deductions a taxpayer with income over a certain threshold could take for things like charitable donations.”

GILTI

In a move that will largely affected US citizens living and working abroad, as explained by the National Law Review, Biden will raise “the 10.5% global intangible low tax income (“GILTI”) tax on the un repatriated low-tax earnings (over a certain threshold) of the foreign subs of U.S. corporations to 21%.”

Analysts Dismiss Concerns Over Biden’s Tax Plan

Analysts Dismiss Concerns Over Biden’s Tax Plan

Despite plenty of concern from business leaders in the US, some analysts in the banking and financial sector have said they shouldn’t worry about Biden’s tax plan.

Speaking to Bloomberg, Solita Marcelli, UBS’s Americas Chief Information Officer, said that her organization believes “Biden will further tilt toward pro-growth policies, especially now that policy winds have shifted,” adding that “focusing on balanced budgets in the near-term is not a priority for politicians, nor financial markets for that matter.”

As explained by Bloomberg’s Berber Jin, Marcelli thinks “Biden will focus more on ensuring a rapid economic recovery than on punishing wealthy investors, which would be a boon for the stock market and ultimately prevent drastic changes to corporate profits.”

Marcelli ultimately believes that “the potential economic gains from those spending packages would also make up for higher taxes on wealthy individuals, whose spending behavior probably wouldn’t change anyway.”

Furthermore, Dr. Austan Goolsbee, a professor at the University of Chicago and former chair of the Council of Economic Advisors under Obama, believes Biden’s tax plan will not negatively affect American businesses.

Speaking to Yahoo, Goolsbee said: “I think that the $2 trillion corporate tax giveaway that we had at the beginning of the Trump administration has not proven to increase investment by anything like what they said. It mostly served as just a windfall handout. And I think that if you back to a totally reasonable level of corporate tax and you couple it with direct public investments as well as incentives for companies to make new investments, you can definitely prevent any downturn in corporate investment and GDP.”

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