By Professor Anthony Rivieccio MBA PFA
By the time you read this, it will be pretty much presumed, if not certified, that Joe Biden will be the next President of The United States. But the President does not make the laws. He can suggest, but it is Congress that creates them.
And on that note we still have a divided nation. Actually some would say across the United States Congressional elections, we did not have a blue wave- but a red one. Republicans picked up seats , both in The House ( where Democrats rule) and The Senate ( where the Republicans rule).
So how is our new President going to move our Country, economically? He has already mentioned many tax policy suggestions. But basically, tax increases and tax credits with tax increases.
- He wants to make corporate taxes higher.
Under his tax plan, the corporate tax rate would be increased to 28 percent, almost a 30 percent increase from where it is now. Increasing the corporate tax rate to 28 percent, Biden believes, should generate between $3.3 trillion and $3.7 trillion in estimated extra revenue over the next decade. Joe is also insisting on a minimum, absolute business tax of 15 percent.
According to Joe, there will be no more write-offs to zero percent like he says is the case with Amazon, for example.
- A new “financial risk” fee on banks
Joe believes that big banks should maintain Federal Deposit Insurance ( FDIC) but he says this insurance should be paid for, and covered by banks, not the government
- A 10 percent wealth tax
If you make over $500,000 a year, get ready to pay more in taxes. Biden would like to see America’s richest workers open up their wallets. He’ll do this by raising the top marginal income-tax bracket from 37 percent to 39.6 percent.
- A payroll tax for people making over $400,000
Currently exempted from paying 12.4 percent Social Security tax, under Biden’s proposal, those making over $400,000 would have this tax reinstated.
- Higher capital gains taxes
If you make $1 million, currently your capital gains tax rate is close to 40 percent. Under Biden’s plan, it could go as high as 43 percent, representing an 8 percent increase.
- Lower small business deductions
If you make more than $400,000 in business earnings, you can expect your small business deductions to be phased out. This could be a loss of over 40 percent.
So if we look at the ” tax side” of the fiscal ledger, we don’t believe that our divided government will approve any of his proposals, especially for needed revenue
So what about the ” tax credit” side?.
- Institute first-time homebuyers’ and renters’ tax credits
Biden talked up the idea of providing new homebuyers with a tax credit worth up to $15,000. Known as the First Down Payment Tax Credit, it would aid first-time homebuyers in covering the initial costs and fees associated with purchasing a home.
Additionally, Biden wants to provide Section 8 housing vouchers to eligible families so they won’t have to spend more than 30 percent of their income on rent.
- More money for child and dependent care
Joe wants to increase the allowance of extra monies for child and dependent care credits, from the current $2,100 to $8,000, a 74 percent increase.
The Republican party, we hope and believe, will help to pass these items, simply because we are and will be for some time, in an economic crises.
So, we believe if you make under $100,000, have children or are buying a home, you can get lower taxes by about 20% down the Biden Plan road. If you make over $400,000 in income, own a business, and handle foreign exchange, get ready to cough up an extra 80%. In between, what many would call the middle class, the change would be miniscule.
So with 2020 being an incredible year, from COVID, to racial inquality, I’m sure Joe has many ideas. But as far as fiscal policy goes- were going to be really struggling as a US economy.
Professor Anthony Rivieccio, MBA PFA, is the founder and CEO of The Financial Advisors Group, celebrating its 24th year as a fee-only financial planning firm specializing in solving one’s financial problems.
Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Kiplinger’s Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Co-Op City News, The Bronx News, thisisthebronX.info, The Parkchester Times, The Red Parrot and The Bronx Chronicle.