With Joe Biden now officially in the White House, it is a good time to address some changes he might make based on his platform. The question is, what does “Bidenomics” mean for your wallet? Over the years, I have found that politicians’ actions are often incongruent to their words. Here are some of his proposed changes:
1. Those making under $400,000 will be unaffected. His proposal is to leave those earners alone and add a “Social Security Increase Tax” of 6.2 percent on all income earned over $400,000. Social Security is in jeopardy as Baby Boomers (10,000 people turn 65 every day) are withdrawing Social Security benefits faster than working Americans are contributing. The affluent would be bridging that gap.
2. Income earners over $1,000,000 would incur higher capital gains taxes. Americans with over $1 million in total income would see income received from dividends, as well as capital gains, taxed like their wages. In this scenario, if you had a stock or business sale, your capital gains tax doubles from 20 to roughly 40 percent. This would change many business and investment decisions. You should consider making those sales now, as usually these changes are “grandfathered” in.
3. Corporate tax rates would be increased. His proposal would increase corporate tax rates from 21 to 28 percent. This is a big change that could have corporations reevaluate moving or setting up subsidiaries overseas.
In essence, his proposals would be taxing the rich and protecting the middle class. Based on our current national and state budget deficits, I do see the middle class paying more taxes eventually. President Biden has vastly different viewpoints on many issues than Donald Trump, especially on energy, climate change, health care and infrastructure.
The Green New Deal was a centerpiece of Biden’s campaign. Some areas where President Biden said he would concentrate on include traditional and digital infrastructure, electric cars, telemedicine and green and clean energy. There has been much anger and angst over the fact that Congress had taken so long to pass an additional stimulus package since the last one ended on July 31.
Some highlights of Biden’s $1.9 trillion stimulus relief plan called The American Rescue Plan include extending unemployment benefits, increasing the federal minimum wage to $15 per hour, expanding COVID-19 testing and immunizations centers, and funding state and local government, and $30B for PPE.
The plans includes a second stimulus check. Individuals making less than $75,000/year receive $600, couples making up to $150,000/year receive his target $1,400 and $600 per child. There is also aid for small businesses. That includes Triple P (Paycheck Protection Program) funding, $20 billion for businesses in low-income communities, and $15 billion in aid for struggling live venues, movie theaters and museums, to name a few venues.
There is still a lot of uncertainty surrounding the pandemic and when the economy will get back on track. However, it seems likely that income and estate taxes will rise for the wealthy. For example, under Biden’s proposed plan, when all is said and done a $100 million dollar estate will be taxed at 67.3 percent.
However, if everything proposed becomes law, there will be a renewed interest in Irrevocable Life Insurance Trusts to leverage off life insurance companies to pay these taxes with pennies on the dollar.
Robert Intelisano owns an independent insurance agency in Forest Hills. He can be reached at Rob@InsuranceDoctor.us.