What Will Happen to My Tax Obligations if Joe Biden is Elected President?
On Tuesday, the second day of the Democratic National Convention, former Vice President Joe Biden was officially nominated as the Democratic Party’s presidential candidate for the upcoming election in November. The nomination comes as no surprise, since Biden’s last remaining primary opponent, Senator Bernie Sanders of Vermont, suspended his own bid for the presidency in early April. Biden, along with his running mate Senator Kamala Harris of California, hopes to unseat President Donald Trump who is finishing his first term in office.
Over the last few weeks, as it was clear that Mr. Biden was getting the Democratic nod, many of my clients have asked me what a Biden administration would look like in terms of his tax plan. Of course, taxes are an important issue for private citizens, as well as those who own small and medium-sized businesses. Large national and multinational corporations also have a great deal of interest in the tax policies that Mr. Biden would attempt to implement if he were elected.
Planned Tax Increases Across the Board
According to a variety of sources, Mr. Biden has proposed a tax plan that would essentially raise taxes in every place possible. An opinion piece in the Wall Street Journal recently outlined how Biden’s tax policy would affect the average citizen, small businesses, and large corporations. Here is a brief overview, taken from Mr. Biden’s campaign speeches and his well-publicized platform:
- Income taxes: An increase in the top marginal rate from 37% to 39.6% and a repeal of the $10,000 maximum deduction for local and state taxes. High earners would be hit by a limit of itemized deductions to just 28% of their face value.
- Payroll taxes: Application of a Social Security tax rate of 12.4%, divided between employers and workers, for all income above $400,000 with no cap. When combined with his planned increase for income taxes, the marginal tax for top earners would be over 50%. State income taxes would push that number into the 60s in many situations.
- Capital gains taxes: Those earning over $1 million per year would be subject to capital gains and dividends taxes at the top income tax rate of 39.6%–nearly double the current top rate of 23.85%.
- Corporate income taxes: An increase from 21% to 28%. This could drive companies to consider relocating abroad, as the average corporate tax rate in the European Union is currently 21.8%.
- Corporate minimum taxes: Establishment of a minimum tax of 15% on “book income” for companies with $100 million or more in profits. The Biden campaign said this would affect roughly 300 companies.
- Taxes on foreign earnings: Double the minimum tax on “global intangible low tax income” (GLIT) from 10.5% to 21%. This would ostensibly dis-incentivize companies from moving abroad.
- Tax credits: Biden’s plan includes a number of new tax credits, both “advanceable” and refundable, but critics say that many of the credits are intended to subsidized specific behavior and favored businesses—effectively basing tax credits on a person’s or company’s politics instead of finances.
Overall, the Biden campaign has pledged not to raise taxes on anyone who makes less than $400,000. Tax experts, however, point out that higher corporate taxes are eventually borne by employees in the form of lower wages or by shareholders and pensioners in reduced dividends and returns. Analysts say that the Biden plan will reduce after-tax incomes for every tax bracket, with an estimated 1.4% decrease for those in the middle class.
Contact a Hoffman Estates Business Law Attorney
The United States Tax Code is extremely complex, especially as it applies to various types of businesses. If you have questions about your company’s tax obligations, contact one of our experienced Naperville business tax planning attorneys to get the guidance and direction you need. Call 630-756-1160 to schedule a confidential consultation at the Gierach Law Firm today.