Today is the deadline for performing that unpleasant task that generally falls on April 15.
Many of us are likely wondering how our taxes will be affected if we have a different administration coming in next year.
Several articles in financial outlets give us a preview.
In a nutshell: Your tax bill will be bigger and maybe a lot bigger under a new administration.
Presumptive Democratic presidential nominee Joe Biden has laid out the key points in his economic platform—and it’s one that would have been considered verboten in mainstream politics just a few months ago on both sides of the aisle.
He says he’s going to raise taxes.
In an effort to consolidate the left of the Democratic Party, Biden has “partnered” with Vermont Senator Bernie Sanders, whom he defeated for the nomination.
The Biden Campaign has put out a 110-page Biden-Sanders Unity Taskforce document that makes recommendations that would be the foundation for Biden economic policy. Former Secretary of State John Kerry and Rep. Alexandria Ocasio-Cortez are co-chairmen of the Unity Taskforce.
Socialist Sanders’ ideas seem to have prevailed over Biden’s in the taskforce’s economic policy recommendations:
An analysis of the proposed tax and spending plans put forth by the candidates during the 2020 Democratic primary found that Sanders wanted to bring in more than $27 trillion in tax revenue over 10 years compared to Biden’s proposed plan of less than $4 trillion.
And now, in a dramatic change of direction, Biden is saddling up to Sanders in an attempt to cocreate policies that appease a wider base of Democratic voters.
One of the pillars of the Biden tax plan is that capital and income will be taxed at the same rate. This will be terrible for retired Americans who have done the responsible thing and invested in stocks to support them after their working years.
A Biden administration would increase corporate tax rates and restore estate taxes to a higher level. This may sound like sticking it to Richie Rich, but if Richie’s corporation is less prosperous, it will be able to hire fewer workers.
Calling the results of Biden’s changes from the Trump administration tax policies “severe,” the Wall Street Journal this morning gave us some sobering figures for individuals taxpayers:
To see what a good deal we have now, let’s look at the numbers. A married couple filing jointly shows $78,000 of ordinary income, their current marginal rate is 12%. When the Trump tax cuts expire, their marginal rate will more than double, to 25%.
If you receive $30,000 from Social Security and have $36,000 of other income, you will be taxed at a marginal rate of 46%, even while supposedly being in the 25% tax bracket (because of the nutty way Social Security is taxed). In some cases, your tax rate can go as high as 56%.
More people will experience rising tax rates throughout retirement—first gradually, following the accelerated required minimum distributions from their retirement accounts, and then suddenly, when the first spouse dies and the survivor has to file as a single taxpayer.
If a President Biden has his way, the top capital-gains tax rate will be 39.6%—the same as for ordinary income. This could be a triple whammy: cutting the estate tax exemption in half, eliminating the capital gains reset to fair market value, and then doubling the capital-gains tax rate. A small step for the government, a giant loss for the American family. If the Democrats win in November, attorneys across the country will rack up the billable hours as their wealthy clients review their estate plans between Election Day and year’s end.
The U.S. has spent an astronomical amount of money in recent to combat the effects of COVID-19. But Biden isn’t saying that we will cut down on spending in the future and use the extra money you send to DC to restore our fiscal foundation. Not at all:
It would be one thing if Mr. Biden were campaigning on a return to fiscal probity, a sound dollar, balancing the budget, and slashing the national debt, but he isn’t. The former vice president’s ambitious spending programs would more than offset any new revenue from his tax proposals.
The nonpartisan Tax Foundation concludes the Biden tax plan would reduce the size of the economy by 1.51% over the long run and lead to 585,000 fewer full-time equivalent jobs while lowering after-tax income for all income quintiles. This isn’t a debate between growing the pie vs. redistributing the pie; it is about everyone settling for a smaller pie.
Next April could be uncommonly painful.