by Gregory S. Dowell

January 6, 2021

Assuming we have a transition of the presidency (a hesitation that would have seemed silly in any other presidential transition), what would a Joe Biden presidency look like, in terms of tax implications?  Here is a very quick overview of changes impacting individuals, estates, businesses, and corporations:

1. Highest individual tax rate will increase to 39.6% (up from the current 37%).
2. Increase in Social Security taxes on employees making more than $400,000.  Currently, SS tax is paid only on the first $137,700 of wages or self-employment income (indexed each year for inflation).  The SS tax rate is 12.4%, divided equally between employee and employer, or born in full for those who are self-employed.
3. Increase in capital gains rate on those with income in excess of $1 million; capital gains would be taxed at the same rate as ordinary income, or 39.6%.
4. Eliminate the 20% Qualified Business Income deduction for those with taxable incomes over $400,000.
5. Reintroduce a phase-out of itemized deductions as income increase, and cap the total benefit of itemized deductions at a rate of 28%.
6. Instead of allowing a deduction for retirement contributions, so that the deduction is worth more as a tax bracket increases, all contributions would generate a refundable credit at the same percentage rate, regardless of the individual's tax rate.
7. Expansion of child and dependent care credit to $8,000 - up from $3,000.
8. New first-time homebuyer's credit of up to $15,000, advanced to the time of purchase, rather than the time the return is filed.
9. Increase the child tax credit to $3,000 ages 6 to 17 and $3,600 for children under 6, and make it fully refundable.
10. Estate tax changes would include an elimination of the step-up in basis at death, presumably taxing all appreciation at death.
11. Reduce the estate tax exemption to $3.5 million and the maximum rate to 45%.
12. Increase corporate tax rate to 28% from the current 21%.
13. Create a new "minimum" tax on corporations.
14. Significant penalties for offshore production by US companies.
15. Provide a "made in USA" credit for companies making investments that create jobs in the US.