I try very hard to stay away from politics but with the election in two months I think it is important to take a look at the tax reform proposals that Joe Biden has issued since kicking off his presidential campaign.

Business Taxes

The current C-Corp tax rate is 21%. Biden wants to increase that rate to 28% and impose a 15% minimum tax on large corporations. Without getting too far into the details, he also has several different targeted proposals increasing taxes on multinational corporations and/or companies in specific industries. For example, Biden backs a carbon tax. However, Biden also proposes several new tax credits or expanding existing credits for businesses. These include a new manufacturing communities tax credit and increasing credits for those business that hire disabled workers or offer retirement plans for employees.

Individual Taxes

Biden’s proposals generally aim to raise taxes on the rich and see lower- and middle-income individuals pay less. Some specifics for raising taxes on the rich:

  1. Currently wages over $137,700 are not taxed for social security purposes. Under Biden’s payroll tax proposal, employees and employers would have to start paying this 6.2% tax again on wages in excess of $400,000.
  2. He would like to raise the top tax rate from 37% to 39.6%.
  3. He would like to put a cap on itemizing deductions at 28% of their value no matter your marginal tax rate.
  4. He wants to phase out the qualified business income deduction.
  5. He wants to tax millionaires’ capital gains at ordinary rates instead of cap gains rates.
  6. He wants to lower the estate tax exemption back to around $5 million which is down from the current exemption amount of $11.58 million.
  7. He wants to roll back like-kind exchanges.
  8. He wants to bar investors with incomes over 400k from using real estate losses to offset other income.

Some of Biden’s proposals for lowering taxes for certain individuals include:

  1. Upping the credit for child and dependent care expenses.
  2. Creating a new credit for family members who provide long-term care for elderly relatives.
  3. Increasing the health premium tax credit for individuals who buy health insurance through an exchange.
  4. Forgiving student loan debt and excluding the forgiven amount from tax.
  5. Giving new breaks to first-time home buyers and renters.

Even if elected, these proposals obviously have a ways to go before changing current tax law. Nevertheless, I think it is important to understand at least some of the details of any potential changes.