Tax Increases Proposed by the President
If President Biden wins re-election and the Democrats control the Congress after the November 2024 election, there are a number of tax increases planned for us.
The tax relief for all taxpayers enacted in 2017 and took effect in 2018 will expire at the end of calendar year 2025. It was called The Tax Cuts and Jobs Act (TCJA). If the first sentence of this piece becomes true, the repeal of those tax relief provisions may come sooner.
That expiration of the legislation or earlier repeal would result in the following:
Higher tax brackets: The TCJA generally lowered marginal tax brackets. For example, the top tax rate fell from 39.6% to 37%. The second lowest tax bracket dropped from a 15% rate to a 12% rate. If the TCJA changes go away, the old tax brackets would return.
Standard deduction: The TCJA roughly doubled the standard deduction, so it would be roughly cut in half after 2025.
Less Child tax credit: Not only did the TCJA double the Child Tax Credit from $1,000 to $2,000 per qualifying child, but it also increased the income threshold to qualify from $110,000 to $400,000 for joint tax filers. That provision would be removed.
Higher Qualified business income: Also known as the “pass-through” deduction, the 2017 law allowed owners of LLCs, S-Corps, partnerships, and sole proprietorships to deduct as much as 20% of their business income. Small businesses would pay more.
Higher Estate tax threshold: Estate taxes now only kick in for estates above certain asset thresholds. The TCJA doubled the amount of money that was exempt before the estate tax took effect and will revert to old levels after 2025.
In his State of the Union address on March 7, President Biden said: “Now it’s my goal to cut the federal deficit by $3 trillion more by making big corporations and the very wealthy finally pay their fair share.”
Note he did not propose a plan to lower government spending, only to raise taxes.
Those new taxes would be:
Increase the Corporate Tax Rate: From the current rate of 21%, he would raise it to 28%. In addition he would increase the 15% corporate minimum tax on companies reporting over $1 billion in profit that was included in the 2022 Inflation Reduction Act to 21%. Further, corporate tax deductions now allowed for salaries and interest payments would be eliminated.
Impose a ‘Billionaire’s Tax: It would impose a tax rate of 25% on the wealth of billionaires.
The new taxes would extend ‘Bidenonmics’ and have a chilling effect on what already is a shaky economy.
Without belaboring the fact that a corporate income tax is also a tax on the owners/shareholders who must also pay individual income taxes on corporate dividends and therefore taxed twice, raising the corporate tax rate leaves less for the companies to issue in dividends, reinvest to keep facilities up-to-date and/or expand, and to innovate.
The new billionaire tax rate of 25% would be imposed on net worth regardless of taxable income. In other words, there could easily be a billionaire who has everything tied up in investments and little taxable income while someone with a higher income would pay less in taxes. And the value of net worth is simply that of any point in time may be valued at X, which can change from X to X minus Y tomorrow. This “tax” would be a new wrinkle where net worth is taxed versus income. Think about it. If it’s an annual 25% tax on net worth, it would take a very short time to eliminate most of net worth of anyone.
There is no high-income person or couple in this country, unless you buy a tax-free bond, that doesn’t get taxed at a minimum of 20%, whether it’s interest or dividends or capital gains. So, there’s no billionaire in this country that has income that is not already paying at least 20%.
The facts are an economy that values investment and job creation and/or retention of jobs will be more successful for more people than one that does not.
Here’s a quote from IBM’s Vice Chair Gary Cohn after the President’s SOTU: “We do a very good job in this country of taxing income. If you actually look at who pays taxes in this country, the bottom 50% of earners in the United States pay 2.3% of tax collected, and the top 10% pays over 70% of tax collected.”
Again, while the President expresses a desire to lower the annual deficit and debt, his only remedy for accomplishing that is to raise taxes. There’s seemingly no interest and certainly no plan to lower spending.
There you have it in a nutshell.
Taxes will go up on everyone now paying taxes.
Yea! We can all start paying more of our ‘fair share.”
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Have a great and prosperous week.
Hug somebody.
References:
SPIDER Bites
This week’s trivia question is: Other than litter what’s a group of kittens called? The answer to last week’s question re: How many keys on a piano: 88. Piano keyboards have 52 white keys and 36 black ones. The whites provide the natural notes, A, B, C, D, E, F, and G. The blacks play sharps and flats.
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