The one most discussed, controversial topic of 2020 that dates back further than COVID: the presidential election. With less than one week to go, here are some of the vital changes each candidate brings with them.
Trump’s office is known for having passed some of the most significant tax cuts in decades, and if Biden is elected, that may change very quickly.
One of the first substantial changes that Joe Biden will put into effect is increased tax rates for individuals making over $400,000 a year.
Biden plans on raising the individual income tax rate from 37% to 39.6%. However, some states could see combined tax rates, both federal and state, as high as 62%, and some even higher. This proposition alone has caused quite the stir from top earners countrywide.
He has also promised to hike up the tax rate on long-term capital gains, or assets that have been held for longer than a year then sold. Under Biden’s proposed rate, those with an annual income of $1 million or higher can expect to pay 39.6% on their capital gains, up almost double from the current rate of 20%.
In 2017, Trump passed into law tax cuts that lowered the corporate tax rate to 21% for C corporations. Biden has vowed to increase that to 28%.
Then there is Biden’s plan for estate taxes… Currently, an individual can pass up to $11.58 million to their beneficiaries without exposing them to the 40% federal estate or gift taxes.
Biden looks to increase this rate up to 45%, limit the pass on the amount to $3.5 instead, and tax the beneficiary for unrealized capital gains upon the death of the benefactor. This will force beneficiaries to pay taxes immediately instead of being able to use a “step-up in basis” where the beneficiary can assume the market value of the assets at the time the benefactor passes.
On the other end of the spectrum, if President Trump should be re-elected, it is believed that many tax rates would either remain the same or, in some cases, be reduced once again.
In 2017 alone, the year that Republicans signed the Tax Cuts and Jobs Act into law, Americans paid almost $64B less in taxes.
As for income taxes, “Tax Cut’s 2.0,” an idea that his administration has been talking about since 2018, would aim to cut the 22% marginal income tax rate to 15%.
This is a true battle of red and blue.
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