Biden and Trump will face each other in the coming election. The current President Donald Trump (Republican) and former Vice President Joe Biden (Democrat). Their tax plans could be defining for those who go to the polls on November 3. Biden and Trump will face each other in the coming election.
These days, several surveys and studies focus on political forecasts in a country that is about to make a major decision, which will affect the US for the next four years. In particular, many worries about the issue of taxes and the consequences that one or the other would have on an applicant to take power.
In a text by Wes Moss, published in The Atlanta Journal-Constitution, it makes a comparison between Biden’s proposed tax plan and President Trump’s current policy. Moss is a financial and economics specialist, who has hosted “Money Matters” at News 95.5 and AM 750 WSB in Atlanta for more than 10 years. He is the leading investment strata of Atlanta-based Capital Investment Advisors.
As the article refers, there is evidence that reflects what President Trump’s federal tax rates and Biden’s proposed rates would look like, to look at how wide the disparities are, on the eve of the US election.
According to Moss, the following figures “correspond to the highest or maximum tax category for each of the four categories. What you finally pay is your effective tax rate, a combination of the different tax brackets that increase as income increases.”
“Of course, effective tax rates are unique to each person’s individual tax situation, and I thought it would be helpful to look at the proposed new higher tranches where there is the potential for the greatest change,” he said.
As the finance expert adds, “Biden’s proposal would affect a very large swath of the U.S. economy and pay meaggouts, and higher tax hikes would go to high-income individuals and corporations.”
To explain it better, start with corporation tax. “U.S. companies’ income taxes are likely to reach the market in their entirety. An increase here would likely affect the vast majority of the net profits of publicly traded companies and therefore their 401 (k) [retirement plan].”
“Biden’s income and payroll tax rates are perhaps the most stressful. The Democratic candidate proposes not only to increase the maximum level of income taxes from 37% to 39.6%, but also includes an additional payroll tax for employees earning more than $400,000 with 6.2% paid by the employee and 6.2% paid by the employer,” adds Moss.
It also details that “the 12.4% icing on this tax collection cake is for U.S. business owners who earn a salary of more than $400,000 a year and would have to pay both sides of this new tax. Ultimately, this is a loss scenario for high-income business owners, as they would reach the 52% tax level with combined income and payroll.”
What would happen to small businesses?
As Wes Moss explains: “Small businesses, that is, those with 500 employees or fewer, are the backbone of American industry. These companies account for more than 99% of the total number of all U.S. companies. They produce jobs for nearly 50% of our workforce and about 45% of our nation’s GDP. In 2019, they created more than 60% of the new jobs in our country or 1.5 million jobs per year.”
“Biden’s small business tax increase occurs by reducing or eliminating existing tax deductions for these companies. Putting these companies in a financial domain would suffocate these mass job creators,” the analyst says.
Taxes on capital gains and dividends
On capital, Moss first comments that “the current rate of 23.8% comes from a maximum capital gains rate of 20% and a net income tax on investment of 3.8% for families earning more than $250,000 per year.” However, according to Biden’s proposal, “the maximum rate of 20% would be replaced by a mirror of the 39.6% threshold for marginal income taxes. Clearly, current capital gains tax rates would be transformed into the ordinary income rate. The figure of 43.4% of our previous breakdown comes from the addition of the 3.8% investment tax.”
From his point of view, “he would have to be quite left on the political spectrum to support these tax increases.” That’s why he believes Biden’s supporters may believe that higher taxes mean more government control and an increase in the quality of life in the US. I’m sorry to disagree. Think about where we are. We are in a phase of economic recovery. If there is a good argument for raising taxes, the only thing I can think about is that it could help us get out of the huge debt and deficit that the US continues to accumulate.”
And he quotes: “But even this idea doesn’t pass the test of fire. Solving the deficit problem will require strong economic growth in addition to spending limits. Tax hikes only serve to quell this uptick.”