Biden has been quite active since his inauguration, and his plans to build back America are in full throttle. He aims to make America better through taxes, so is that something you should worry about?
Biden’s Tax Agenda
Biden’s tax agenda is pretty straightforward. He is like a modern Robin Hood, imposing high taxes instead of robbing the rich. Biden plans to increase tax rates for those who earn more than $400,000 per year.
It’s a smart move, but it might have adverse impacts on the stock market. This is because when the wealthy 1% of the US has to pay additional taxes from the rest of the population, they’ll start stockpiling their money and investing in defence portfolios. Many of the country’s 1% tends to know how to get out of paying taxes. Warren Buffet once said his secretary paid more taxes than he did (*SOURCE: Fool.com). The poor don’t see much differences because they have no money to be taxed on, so in effect, it’s the middle class that usually feels the Tax pain the most.
This chain of events can limit stock market movement in the future. Rallying up your top financial advisors for a meeting might be a good plan of action. Looking on the bright side, Biden plans to strengthen the education system and family support will (hopefully) help people. Here are all the updates on Biden’s plans.
Full On Revamp
According to Bloomberg, President Biden’s tax plan is getting a makeover, and the old idea is being shredded. The fact sheet released by the Whitehouse indicates that Biden’s core proposals are being re-thought, and new comprehensive plans are being put in action. The high corporate income tax rate, increasing the top marginal income tax rate, and the capital gain rate are likely to be replaced by a minimum tax on the profits of corporate financial statements and surtax on millionaires.
These plans sound much better and made by a financial analyst because if you want to take taxes from the rich, target them, not their corporation. When corporations are faced with heavy taxes, they tend to increase their price, causing inflation. Theses costs are thereby passed on to the consumer.
A Change Is Coming
The US government isn’t going to suck its citizens dry and take all the money for themselves. Therefore, according to December 2021 reports, the senate has reconsidered Biden’s tax plans. As a result, the information we shared above might be closer to becoming real than the initial Build Back Better Act proposed by the president.
And why not? Imposing heavy taxes on corporates doesn’t affect the wealthy people of this nation. The average citizen has to bear the load of increased taxes. So why not target the ones with all the money? That’s where Biden’s plans are headed for now.
Changes in the 1031
Biden’s tax plan aims to remove the IRS section code 1031, which real estate investors have used to gain more wealth. IRS section code 1031 states that a taxpayer may defer taxes on the property sold if the sale is reinvested in another property of equal or more value but smaller in size. Biden aims to impose a tax on property sales above the $500,000 mark.
Wealth Distribution
The Biden administration’s fiscal year 2022 focuses more on distributing the wealth rather than growth. The budget incorporates the Made in America tax plan, American jobs plan, and its American Families Plan.
The proposed tax reforms are intended to modernize the US tax system to increase revenue, respond to current fiscal challenges, improve tax administration, and make the tax system more efficient.
The American jobs plan
This plan would increase income taxes on corporate profits to help fund the government’s plan to improve infrastructure.
The plan’s corporate policy is to ensure that large corporations pay their fair share of taxes, stop corporate profit-shifting to tax havens, and encourage job creation.
The Biden administration has recommended a minimum corporate tax of 15% on book income to prevent profitable companies from escaping US taxation, reacting to an independent study that revealed 91 of the fortune 500 companies paid no US corporate income tax in 2018.
The American Families Plan
The plan proposes to increase taxes for wealthy individuals and an increased capital gains rate. The funds would be used to provide for low and middle-income households. It would provide free education from pre-kindergarten through 2 years of community college, assist colleges and universities serving minorities, and other institutions.
The Biden Administrations’ proposal on individual tax rates is designed to avoid tax increases on individuals with income below $400000.
The proposal of tax increases on the wealthy would only affect the top 1% of taxpayers. In addition, wealthier Americans would also be charged an additional 3.8% surtax on Net Investment Income. The Biden capital gains proposal would almost double the federal tax imposed on long-term capital gains.
Increase IRA Funding
Years of underfunding the IRA have reduced auditing and enforcement efforts costing the government a substantial amount of tax revenue. The Biden administration proposes to increase IRS funding to ensure enforcement of tax law compliance by high-income individuals and corporations. This will enable the IRS to recover hundreds of millions of dollars in tax liability that currently go unpaid.
The IRS will be provided with resources, information, and technology to improve taxpayer service, taxpayer compliance, and enhance enforcements to close the tax gap to build a fairer, more efficient tax administration system.
The Bottom Line
Rally your financial advisors and financial analysts because we suspect Biden’s tax plan will change many things for investors. With all the proposed changes and the IRA backed up with enforcements, you will definitely need some help in managing your taxes. The changes in 1031 could greatly affect real estate investments. As a result, residential properties will only be purchased for living, not for investment purposes. In a recent poll, Biden had a 33% popularity rating amoung Amercians (*SOURCE: CNBC), party in due to Inflation, a resurgence with Covid-19 and now Monkeypox, a new disease on the rise. Could this be the “nail in the coffin” that keeps him from taking a second term?
