So earlier today Biden has indicated an increase to the capital gains tax on the “wealthy”. Oh come on, really? Are you sure it’s only going to be on the “wealthy”? We shall see in practice is this gets pushed through and passes through Congress – if they still going through passing legislature in Congress.
With the amount of Executive Orders Biden has signed, I cannot keep up nor how many has been signed already.
So here’s a thought that just came to my mind as I watched the video above via Bloomberg Quicktake’s Tweet… If they supposedly state that Biden will raise the tax on the wealthy and not increase the taxes on the individuals / families making less than $400,00… To me I see it as a double edge sword. How so? Let me think out loud here…
Taxes increase on the wealthy who make $400,000 and more ~ Of course the wealthy can afford anything even some middle class persons if knowledgeable enough and well connected to seek out financial advice to see how to lower their taxes overall. Example if I’m going to make big bucks – I would see what’s out there financial planning wise to lower what I would owe in taxes so I can be able to have more disposable income (more money to spend on whatever I choose to). I mean lots of investment income encompasses investment losses. So I’m sure plenty of financial savvy folks will utilize investment losses to lessen or lower their tax rates in response to this.
Or if anything, the people who financially proficient will probably just pack up and leave… then who then will the Federal Government go after to tax to get money into the big government…? The people next down – making less than the “wealthy”. As I heard the phrase before – “shit rolls downhill”.
So Bureau of National Affairs has put out the President’s road map of his tax plan. I’ve included the actual PDF in here for everyone’s viewing. I do have to make note of some items that caught my eye…
To compare the SALT limitations – So in simpler terms (how I interpret) the SALT cap that is currently in place and maxed at $10,000 (under the Trump Administration). This $10,000 is the TOTAL allowed deduction for state and local taxes (SALT acronym) PLUS your property taxes on your primary residence/home. To help visualize the $10,000 deduction – this amount is reported on a Schedule A – “Itemized Deductions” if you are claiming these types of deductions when you file your Form 1040 each year. This form is to report your property taxes paid on your primary house, state and local taxes paid, mortgage interest, donations to charity, etc. etc.
Now since President Biden is wanting to eliminate the SALT cap – removing this $10,000 maximum amount. Who does this deduction benefit more, now? If you now can deduct more than $10,000, for this simple example? People who have the ability to own large properties or a primary residence AND a secondary residence? Some things for all of us to think about.
Here’s another TAX that caught my eye – it’s the “Transaction Tax” for buying OR selling stocks, bonds and/or derivatives:
Why I ask? Granted if you sell a stock at a gain, you will pay a tax on that gain (the tax paid will depend on the stock being a long term held stock or short term held stock). But if you sell a stock at a loss – similar to a loss in a business – you DO NOT pay a tax because you lost money essentially in that stock. However, President Biden supports this “transaction tax” whether you buy or sell a stock, bond or derivatives of stocks, etc. AGAIN – Why??
And the other one that caught my eye was the Corporate Tax increase and possible “Carbon Tax”:
So I just wanted to share this out there to everyone if you’re not aware of what President Biden may do for future taxes. Again, the PDF of his entire tax road map is included in the link at the beginning of this blog.
I’m a not an economist nor a CPA. However, I do have quite a bit of a background in accounting, business management and operating a small business. So when I see some of the President’s tax and economic policies that may take place – it has me concerned.
Overall, I’m pretty sure quite a bit of us do not want to pay a huge amount in taxes. Whether it be monthly, quarterly or annually. I’ve been looking at past debates during the 2020 presidential election and I do not agree with taxes increasing overall. I honestly prefer more money in our pockets – doesn’t matter what spectrum we belong into under the Progressive Tax system that our Federal Government has in this country. Wouldn’t you agree, that you wish to have more cash “on hand” – in your pockets when you get your pay bi-weekly or monthly? I see it as common sense.
What sound person would not want to have more cash in their hands to do whatever with it, when they get paid? Use it to do whatever they’d like to: purchase clothes, travel to have that humbling experience around the country or abroad, support other business industries, donate to a charity they are interested in, or help out local businesses and communities in their areas, etc.
Here’s my take on some of the above mentioned. Some of it sounds similar to Biden’s proposal, but the underlying fact is INCREASE IN TAX. This goes back to my blog a few weeks ago about the “Laffer Curve“. Very informative video as well about the break down of the Laffer Curve.
So they want to eliminate former President Trump’s corporate tax decrease (was at 21%) and raise back up to 28% or 35% – who knows which one they’ll agree on. Here’s my thoughts on this increase in Corporate Tax… It affects ALL businesses – big or small – who is incorporated (C-Corporations).
Some of you who are not in the field of business or owning a business there are essentially 5 buckets of businesses. In the simplest way I can describe:
1 – Sole Proprietorship – you are the business and you are PERSONALLY liable for all of your business – from your money, to people you hire, to assets you buy to help operate this business.
2 – Limited Liability Company (LLC)
3 – S-Corporation – this entity will be personally liable for the assets, people you hire, money you’ve put it – but you are still the owner – but as a corporate officer.
4 – Partnership – you and your friends get together and form a business – But this partnership is an entity as it’s own and will be liable for anything – similar to S-Corporation. You nor your friends who are the partners are not personally liable – the partnership is.
5 – C-Corporation – this entity, similar to S-Corporation; however, C-Corporation is a taxable entity – under Federal Government. The liability is similar to S-Corporation, to where the C-Corporation entity will be personally liable for the assets, people you hire, money you’ve put it – but you are still the owner – but as a corporate officer.
Overall, small business – as some people may not understand – can EASILY BE ANY of the 5 above types of entities.
Anyone can be a small business – as indicated in the IRS’ website noted above and by the image noted.
Where am I getting at with this? Well, if you are a “small business” and also operating a corporation, a profitable one, then under the proposed tax plan with the new President – your corporate tax will increase. The adverse affect would be, for you as a business owner, you’ll be paying higher taxes and have less disposable income (free cash on hand) to use it towards your business. Should you decide to hire more people, expand or upgrade your technology? You may have to put a hold on it then if your corporate taxes increase as a small business owner.
You may not realize that your neighbor, for example, owns an auto repair shop and is the mechanic as well. He may operate his business as a corporation for all we know. He, too, can be affected by this corporate tax increase proposed. From my perspective – the devil is within the details – and not many people realize to look at it that way. Only see that increase in these taxes will ONLY impact the 1% or the “big business”. Not sorry – but no.
Granted the Wall Street Journal link above is an opinion piece – but how they worded the title of the article is hilarious.
In the above link, the Wall Street Journal has worded this article from the beginning “A Biden Tax-Hike Break for Small Business… Congress should raise the top corporate rate to 28%, but only for the most profitable companies…” Well no sh*t Sherlock. Only way you’ll pay taxes is if you have a net profit on your business (e.g. PROFITABLE)! You cannot pay taxes if your business incurs a loss. It’s like trying to divide a number by 0 – you cannot!