President Joe Biden intends to follow through on his 2020 campaign promises and it is now clear that a flurry of tax hikes are on the horizon posing the first major tax hike since the Clinton Administration in 1993.
“Unlike the $1.9 trillion Covid-19 stimulus act, the next initiative, which is expected to be even bigger, won’t rely just on government debt as a funding source.”WealthManagement.com
Democratic efforts to increase taxes on the wealthy have been on the table for such a long time. Even with the recent COVID Relief Act, people close to President Biden’s conversation are not opposed to more relief due to the pandemic, but this time the people will need to pay for it. Higher income earners and corporate taxes are likely to be the first categories that will see a rise in tax rates. Further government aid will be pivotal for infrastructure and environmental initiatives but the true nature of President Biden’s ideology is to address “inequities in the tax system itself.”
“His whole outlook has always been that Americans believe tax policy needs to be fair, and he has viewed all of his policy options through that lens,” said Sarah Bianchi, head of U.S. public policy at Evercore ISI and a former economic aide to Biden. “That is why the focus is on addressing the unequal treatment between work and wealth.”
Tax Codes such as the 1031-Exchange—and other initiatives set forth by the Trump Administration—will be looked at and possibly adjusted or abolished in order to levy so-called advantages. Nothing Is concrete just yet but a number of figures have been estimating up to $4 trillion as a possibility leaving plenty of work to decide which parts of the new program will be funded. Given that the funds allocation was met with a highly controversial reaction in this last COVID Relief Act, now with quadruple the amount of money on the line and the people paying for it, it could be a while before legislators agree to a compromise.
Centennial Advisers Managing Director Justin White said, “I think the potential to end the 1031 exchange for some tax payers is the biggest impact, but on this list I think changing the tax on pass-through entities would have a big impact.”
Some GOP representatives such as Kevin Brady outright called the emphasis to tax investment of capital gains at marginal income rates, as a “terrible economic mistake,” signaling push-back from the Republicans.
White agrees with Brady in saying, “numerous studies across a variety of political ideologies have found that increasing taxes on exchange transactions and capitals gains reduces transaction volume, and therefore, taxes are generated from transactions as well as income tax for the multitude of individuals involved in the “taxed” transactions.”