The first debate of the 2020 presidential election took place recently and it was…unique. It’s fair to say this was a norm-shattering debate that ran high on emotions and low on substantive discussions pertaining to federal policy. It was not particularly entertaining, but it was revealing in certain moments. The issue of taxes is one prominent example that highlights the stark differences between the candidates. Let’s take a look at each candidate’s proposals when it comes to tax policy.
Joe Biden’s Tax Proposals
The Biden campaign released a number of policy papers, including Vice President Biden’s plan regarding taxes. If elected, Joe Biden would seek to repeal many of the tax changes that were codified in the Tax Cuts and Jobs Act. In addition, a Biden administration would seek to tax capital gains at ordinary income tax rates for individuals earning in excess of $1 million. A Biden administration would also seek to eliminate step-up in basis for inherited assets with capital gains, instead taxing those gains at death.
The Biden campaign also indicated they would seek to adjust the corporate income tax rate, cap the value of itemized deductions to 28 percent for those in higher marginal tax brackets and impose a 12.4 percent Social Security payroll tax on wage and self-employment income earned in excess of $400,000.
Donald Trump’s Tax Proposals
President Trump’s tax proposals are vague and lack much specificity. For example, President Trump has proposed an unspecified tax cut in an effort to boost take-home pay. He also suggested the creation of a “Made in America” tax credit, but has yet to release any substantive details on how this credit would be applied.
President Trump also proposed an expansion of Opportunity Zones, a program created under his tax reform legislation that was intended to help spur investment in economically distressed census tracts by providing capital gains tax relief for individuals and businesses investing in qualified opportunity zones, according to the Tax Foundation.
Tax Policy Will Be a Major Issue in the Coming Years
No matter who wins the 2020 presidential election, there is no doubt that tax policy will be at center stage in the coming years. This is because a number of tax cuts and credits that were enacted under the Tax Cuts and Jobs Act of 2017 (“TCJA”) are scheduled to phase out or expire in the near future. For example, in 2022, businesses will be required to deduct research and development costs over five years rather than immediately. In addition, the deduction for business net interest expense will be limited. In 2023, full expensing for short-lived business investments will begin phasing out. Furthermore, in 2026, the individual income tax changes under the TCJA will expire. These tax changes include the following:
Reduction of individual income tax rates;
The increase in the standard deduction, and
The expanded child tax credit
Concerned about Taxes and Your Estate? Contact InSight Law
If you are concerned about potential tax changes that could impact your estate, now is the time for action. If you are proactive and plan appropriately, it is possible to protect your assets from unnecessary taxation on your hard-earned assets. To learn more, contact InSight Law today.