Corporations and wealthy individuals are preparing for the potential for the former vice president Joe BidenJoe BidenPennsylvania’s GOP-controlled Senate spends up to 0K on election investigations Raise taxes if he wins the presidential election.
Biden, the Democratic candidate, has released a number of proposals aimed at raising taxes for high-income people and businesses, although it remains to be seen how quickly and aggressively he would push through tax increases if he wins. With less than two weeks until election day, he leads in many polls nationwide and in major swing states.
Professionals from law firms and accounting firms said corporations and wealthy individuals are asking how they might be affected by possible tax changes in a Biden administration, so that they may be willing to take action to minimize their tax burdens if they feel such action is taken are justified.
“Many companies and stakeholders, especially the more demanding ones, are definitely actively evaluating what the proposals could mean for them and their business,” said Jorge Castro, who served on former President Obama’s transition team in 2008 and now at Miller & Ritter.
Biden wants to raise taxes for wealthy individuals and companies. He said he would not collect taxes on anyone earning less than $ 400,000.
Several proposals from Biden in particular have caught the attention of wealthy people and businesses interested in keeping their taxes as low as possible.
Biden plans to roll back President TrumpDonald TrumpPennsylvania’s GOP-controlled Senate gives up to 0K for election investigations Trump congratulates Rittenhouse on acquittal The memo: Rittenhouse verdict echoes in the polarized nation MORETax cuts for individuals who earn over $ 400,000 annually. These include withdrawing tax cuts and phasing out a deduction for income from non-corporate entities known as “pass-throughs”.
The former vice president has also proposed taxing capital gains at the same rate as normal income for those with incomes above $ 1 million – raising the top rate from 20 percent to 39.6 percent – and taxing unrealized capital gains in the event of death .
Biden said he wanted to bring inheritance tax back to its parameters in 2009. This would result in an increase in the inheritance tax rate from 40 percent to 45 percent and a decrease in exemptions from $ 11.58 million for inheritance and gift taxes in 2020 to $ 3.5 million in inheritance tax and $ 1 million Dollars for the gift tax.
On the corporate side, Biden called for the corporation tax rate to be increased from 21 percent to 28 percent and for a minimum tax on foreign profits of multinational US corporations to be changed.
Businesses looking to keep their taxes as low as possible may consider speeding up their income to reflect the current, lower rates, but defer deductions until all tax increases go into effect. Pass-through company owners may consider expediting the sale of their assets or businesses to take advantage of current capital gains tax rates.
Tax and finance experts said some business owners have already started speeding up their businesses to sell.
“The trend we are seeing is that start-up or management companies that are considering or already on the market in the next six to twelve months are speeding up their process to avoid potential negative effects from a Biden tax plan.” said Winston Shows, senior vice president of tax advisory practice on mergers and acquisitions at investment bank Houlihan Lokey.
He said he saw no evidence that people planned to sell their business in five years’ time and instead planned to sell now.
Some companies have also started increasing their revenues. Christian Wood, director of national tax practice in Washington at accounting and tax firm RSM, said some companies started because they felt tax rates won’t stay as low as they are now, even if Biden loses the election.
“They expect interest rates to go up in any case,” he said.
Many other businesses and business owners have not yet taken specific steps to minimize their taxes, but are considering what they could do depending on the outcome of the November 3rd election and the legislative environment.
“Taxpayers and practitioners are waiting, and I think things will get going on November 4th,” said Todd Simmens, tax partner at BDO and former legal advisor to the Joint Tax Committee of Congress.
A key factor in Biden’s ability to raise taxes if he wins is the outcome of the Senate election. The Democrats must have three seats net profit to take control of the Senate if Biden wins, and the size of a majority could also affect how aggressive the Democrats could be on raising taxes on the rich and corporate. The Democrats are expected to keep control of the house.
Another factor is whether the Democrats will abolish the law filibuster when they have a majority in the Senate. Reforming the filibuster could make it easier to pass laws.
Even if the Democrats take control of the White House and both houses of Congress, the timing and content of the tax legislation is unclear.
Rohit Kumar, a former advisor to the Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellOvernight Defense & National Security – Presented by Boeing – Senate slams Defense Bill on Money – House Democrats pass Biden’s major bill, The Hill’s Morning Report – Presented by ExxonMobil – Representative to vote on Biden’s Social Expenditure Bill McCarthy Delay MORE (R-Ky.), Who is now co-head of Washington national tax authorities at PwC, said if Congress delayed the passage of another coronavirus bailout package until next year, it would delay the review of tax increase laws.
Dustin Stamper, Washington National Tax Office managing director of the accounting and tax firm Grant Thornton, said campaign proposals are candidates’ wish lists and “people shouldn’t expect the tax plan to be implemented exactly as it was campaigned “. . “
Stamper said even if there is a democratic swing, taxpayers should be careful with tax planning. He said it might make sense for entrepreneurs to sell assets in December that they were planning to sell early next year, but there could be “real downsides” in selling an investment or business for tax savings.
In addition to companies and their owners preparing for possible tax increases in a Biden administration, high net worth individuals are also inquiring about strategies they might want to use to lower inheritance tax. One option that estate experts say customers could take advantage of is to give gifts before the end of the year under the current lifelong tax exemption, which is significantly higher than the amount proposed by Biden.
“The interest of wealthy families in estate planning has grown tremendously,” said Anna Salek, partner at Shearman & Sterling.