Since Joe Biden was inaugurated on the 20th of January, it is a good time to address some changes he might make based on his platform. The question is, what does “BIDENOMICS” mean to your wallet or purse?
Over the years, I have found that politicians’ actions are often incongruent with their words. Here are some of his proposed tax changes:
1. Those Making Under $400,000 Will Be Unaffected: His proposal is to leave those earners alone and add a “Social Security Increase Tax” of 6.2% on ALL income earned over $400,000. Social security is in jeopardy as baby boomers (10,000 people turn 65 every day) born from 1946-1964, are withdrawing social security benefits faster than working Americans are contributing; hence, the affluent would be bridging the social security gap.
2. Income Earners Over $1,000,000 Would Incur Higher Capital Gains Taxes: Americans with over $1 million in total income would see income received from dividends, as well as capital gains, taxed like their wages. In this scenario, if you had a stock or business sale, your capital gains tax doubles from 20% to roughly 40%. This would change many business and investment decisions. You should consider making those sales now, as usually these changes are “Grandfathered.”
3. Corporate Tax Rates Would Be Increased: His proposal would increase corporate tax rates from 21% to 28%, a 33% increase. This is a big change that could have corporations reevaluate moving or setting up subsidiaries overseas.
In essence, his proposals would be taxing the rich and protecting the middle class. Based on our current national and state budget deficits, I do see the middle class paying more taxes eventually.
President Biden has vastly different viewpoints on many issues than former President Trump, especially on energy, climate change, health care, and infrastructure. The “Green New Deal” was a centerpiece in Biden’s campaign.
Some areas where President Biden said he would concentrate on include:
– Traditional Infrastructure
– Digital Infrastructure
– Electric Cars
– Green and Clean Energy
There has been much unhappiness and angst over the fact that Congress had taken so long to pass an additional stimulus package, since the one that ended on July 31, 2020.
Some highlights of Biden’s $1.9 Trillion stimulus relief plan called The American Rescue Plan include:
– Extended Unemployment Benefits ($120B)
Jobless workers will get $300-$400/week through September 2021.
– Schools and Colleges ($170B)
– The Federal minimum wage increases to $15/hour.
– COVID-19 ($100B) includes $70B to expand testing and immunization centers and $30B for PPE.
– A 2nd Stimulus Check ($166B)
Individuals making less than $75,000/year receive $600, couples making up to $150,000/year receive their target $1,400 and $600/child.
– State and Local Governments (350B)
– Small Business Boost ($325B) Including
Triple P (Paycheck Protection Program) Funding ($284B) plus $20B for businesses in low-income communities, and $15B for struggling live venues, movie theatres and museums to name a few venues.
What we do NOT know:
1. How much money the government will continue to print?
2. When or if the Covid-19 virus will end?
3. When will companies bring people back to work or IF they will bring employees back?
What we DO know:
1. Income taxes will go up on the wealthy!
2. Estate taxes will go up on the wealthy!
Biden’s Taxes on Wealthy Estates: example of a $100M estate (#’s are in Millions)
Value of the Original Asset ($100M) $100
Cap gains taxed as ordinary income 39.6% + 3.8% NIIT*= 43.4%
Capital gains tax owed: $43.40
Value of the Remaining Estate: $56.60
Biden’s estate tax exemption ($3.5 million) $3.50
Taxable estate $53.10
Biden’s estate tax rate (45%) 45%
Taxes owed on the estate $43.40+ $23.90
Total taxes paid on a $100 million asset = $67.30
Effective tax rate 67.3%
*Note: NIIT (Net Investment Income Tax) is an Obama care tax.
This may or may not happen; however, if everything Biden proposed becomes law, there will be a renewed interest in ILIT (Irrevocable Life Insurance Trust) owned life insurance to leverage off life insurance companies (instead of paying dollar for dollar) to pay these estate taxes (due 9 months from death in cash) with pennies on the dollar, which my firm we can assist with.
Feel Free to reach out to Robert Intelisano CLU, CSA, LUTCF who is a CSA (Certified Senior Advisor) and owner of Intelisano & Associates, Inc. since 1999 at Rob@InsuranceDoctor.us.