Biden’s economic plans will cause US to lose companies, money to other countries: Americans for Tax Reform president
Americans for Tax Reform president Grover Norquist and Wall Street Journal Assistant Editorial page editor James Freeman provide insight on both Joe Biden’s and President Trump’s economic plans.
Democratic nominee Joe Biden has put out a tax plan that hinges on making rich Americans pay more – and the wealthy have already begun visiting with their advisers to prep for what could potentially lie ahead.
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Beau Henderson, a financial adviser and founder of RichLife Advisors, told FOX Business that clients are calling him daily with concerns about the market and their tax situations.
What do the wealthy want to know?
Here’s a look at some of the main issues and strategies the ultra-rich are discussing with their advisers right now.
JOE BIDEN'S 2020 TAX PLAN: THE KEY POINTS
Biden has pledged to repeal lowered income brackets for individuals with incomes above $400,000 – which means the top rate would revert back to 39.6% from 37%.
On top of that, he has also said he would cap itemized deductions for wealthy Americans at 28%.
There are some strategies that wealthy individuals can look into to expose a smaller amount of their income to higher rates, including investing, making charitable donations or structuring their assets as an LLC.
Estate Taxes/Eliminating step-up in basis
The Tax Cuts and Jobs Acts essentially doubled the basic exclusion amount for the estate tax to $11.58 million in 2020 ($23.16 million if married). Assets exceeding that threshold are subject to a rate as high as 40%.
Biden’s plan would undo that change, meaning people would be able to transfer fewer assets without triggering the tax. Biden would also do away with step-up in basis, which means unrealized capital gains would be taxed at death.
There are several ways advisers can help clients adapt their strategies to account for potential changes, including taking advantage of current rates, transferring assets at a discounted value and addressing asset control questions.
Timothy McGrath, managing partner at Riverpoint Wealth Management, said he is discussing whether it may make sense for some of his ultra-wealthy, older clients to sell something today, with step-up in basis intact, rather than to hold on to it.
BIDEN TAX HIKE PLAN CAUSES WEALTHY AMERICANS TO PANIC OVER ESTATE PLANNING STRATEGIES
Another big change Biden wants to make is to tax capital gains at the same rate as ordinary income for households earning more than $1 million.
Currently, short-term capital gains are taxed at the same rates as income, but long-term gains are taxed at lower rates.
Both Henderson and McGrath noted this would essentially double the long-term rate for affected households.
They have each been having conversations with some of their clients about whether it makes sense to take some money off the table this year.
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Overall, McGrath is sounding a more cautious note with clients – advising them not to get ahead of themselves because there are still so many variables at play.
But there are some certainties that individuals can start accounting for, whether they happen within the next year or the next five years.
Both Henderson and McGrath pointed out that provisions of the Tax Cuts and Jobs Act are scheduled to expire in 2025, which means rates will most likely be headed higher regardless.
The pair also separately noted that tax rates likely have nowhere to go but higher, given the large amount of debt the U.S. government has taken on this year as it doled out aid to help struggling Americans weather the coronavirus pandemic.
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