2020 VISION — OR REVISION?
COVER STORY
Plan Now While Taxes Are Low If Joe Biden and a Democratic majority are elected, taxes are likely to increase. If Donald Trump is reelected, chances are good this will still be a low tax year, historically speaking. By John Hilton
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undits say the differences between President Donald Trump and Democratic challenger Joe Biden are as significant as any election in recent memory. That includes tax policy. With Biden holding a steady and substantial polling lead, smart advisors are preparing financial plans so their clients can pay the expected increased tax burden in the most efficient manner possible. And those who are not already prepared better get going, said Robert Keebler, a partner with Keebler & Associates, a tax advisory and CPA firm in Green Bay, Wisc. Waiting until the election is decided is not smart, he said, as any decent accountant and firm will be booked solid through the end of the year. Smart planning will likely mean huge savings for clients, Keebler noted. For example, Biden wants to restore the 39.6% top tax rate for capital gains. That is a big jump from the 20% top rate set in the Tax Cuts and Jobs Act of 2017. Teaming up with Sen. Bernie Sanders, I-Vt., Biden’s task force left no doubt who they see footing the bill for increases in government revenue. A Biden administration will “use taxes as a tool to address extreme concentrations of income and wealth inequality,” the task force wrote. “A guiding principle across our tax agenda is that the wealthiest Americans can shoulder more of the tax burden, including in particular by making investors pay the same tax rates as workers and bringing an end to expensive and unproductive tax loopholes.”
A Taxing Plan
Democratic challenger Joe Biden has made it clear that raising taxes would be a big part of his presidency. The former vice president is targeting the wealthy and corporations with a series of tax increases, although Biden insists only those making more than $400,000 will pay more. President Donald Trump, on the other hand, has few public tax proposals because he achieved much of his taxing vision with the 2017 Tax Cuts and Jobs Act, which lowered rates across the board. Still, the president has vowed to cut taxes further if he wins a second term. Tax
Biden
Trump
Capital gains tax
Wants to restore the 39.6% top tax rate for gains exceeding $1 million.
Has spoken of reducing the top tax rate from 25% to 20% during a second term.
Personal income taxes
Would raise the top rate to 39.6% on those earning more than $400,000. Proposed subjecting incomes above $400,000 to the 12.4% Social Security tax.
Has spoken vaguely of additional middle-class tax cuts if he wins a second term. Signed an executive order to suspend the 6.2% payroll tax for employees for the rest of the year; the tax pays the employees’ share of Social Security. Vowed to make permanent if he wins the election.
Estate tax
The estate tax exemption swelled to $11.58 million in the 2017 tax reform bill; Biden proposes returning it to its 2017 level of $5.49 million, adjusted for inflation.
Backed the estate-tax exemption increase to $11.58 million in the 2017 tax bill. The estate tax is set to sunset in 2025, at which time it could revert to the pre-2018 exemption level of $5 million for an individual taxpayer.
“Step up” basis
Proposed eliminating the step up basis, which allows an heir to pay little or no capital gains taxes upon selling an inherited asset because it “steps up” to market value at death.
Expected to continue support for retaining the step-up basis for capital gains. Defenders argue that it creates liquidity concerns.
Pease limitation
For anyone earning more than $400,000, Biden would impose a 28% cap on the value of itemized deductions. This reinstates the “Pease limitation,” done away with in the 2017 tax bill.
Repealed the Pease limitation in signing the 2017 tax-cut legislation. Is campaigning against higher taxes.
Corporate tax
Biden would raise the corporate tax rate from 21% to 28% and add a 15% minimum “book tax” on income, net of expenses, for corporations with income of $100 million or more.
Has proposed slashing the corporate tax rate again, from 21% to 20%.
October 2020 » InsuranceNewsNet Magazine
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