The election of the U.S President has come to a conclusion (so far…). President-elect Joe Biden ran on a progressive Democratic platform. It envisions increased taxes on investors and businesses, a public health insurance option for Obamacare, lower prices on drugs and bold plans to confront climate change.
The legislation needed to implement much of that agenda might not get past the Senate. Based on the likely outcome of races yet to be called including expected runoffs in Georgia, Republicans have the edge to keep control. More fiscal stimulus is still likely, though less than congressional Democrats had proposed.
Tax policy was one of the major issues of the 2020 presidential election. Mr. Biden’s tax plans include raising the corporate tax rate to 28% from its current 21% (though still below 35%, where it stood under President Obama) and the minimum tax on foreign income to 21% from 10.5%. He has also pledged to repeal the 20% deduction for wealthy individuals’ “pass-through” business income.
Summary of Biden’s Tax Proposals
- Reverts the top individual income tax rate for taxable incomes above $400,000 from 37 percent under current law to the pre-Tax Cuts and Jobs Act level of 39.6 percent.
- Taxes long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6 percent on income above $1 million and eliminates step-up in basis for capital gains taxation.
- Phases out the qualified business income deduction (Section 199A) for filers with taxable income above $400,000.
- Raise the corporate income tax rate to 28 percent, up from 21 percent.
- Double the tax rate on Global Intangible Low Tax Income (GILTI) to 21%.
- For 2021 and as long as economic conditions require, increases the Child Tax Credit (CTC) from a maximum value of $2,000 to $3,000 for children 17 or younger, while providing a $600 bonus credit for children under 6. The CTC would also be made fully refundable, removing the $2,500 reimbursement threshold and 15 percent phase-in rate.
- Proposal to expand the estate and gift tax by reducing the exemption amount to $3.5 million and increasing the top rate for the estate tax to 45 percent.
The platform proposals have yet to be discussed or brought for consideration on new bills before the Congress. However, it is not too early to begin understanding and analyzing the potential impact on businesses and personal income. Proper planning and structuring in times of change are essential. The US and Israel tax groups Grant Thornton Israel can prepare you for the coming changes.
Please feel free to Grant Thornton Israel at 03-710-6644 or firstname.lastname@example.org