Tax Updates

 
Wealth Management February 25, 2021

Tax Updates

The Biden campaign platform proposed major tax changes aimed at increasing taxes on high-income earners and corporations to pay for $3.4 trillion in policy proposals. We suspect many of these proposals were included to help Biden gain the nomination by appealing to the more progressive wing of the Democratic party. Here are a few of the more significant proposed tax changes:

Individual Taxpayers

• Impose Social Security payroll tax of 12.4% on wages earned above $400,000. Under current law, payroll taxes are applied on the first $137,700 of wages. No tax would be applied for incomes between those two levels. (Expected to generate $820 billion in revenue)

• Tax capital gains and dividends at 39.6% (effectively double the current rate) on income over $1 million and
repeal the tax-free step-up in basis at death. Individuals inheriting assets would retain the decedent’s basis
instead of the cost basis resetting upon the owner’s death (Expected to generate $470 billion in revenue)

• Reduce estate and gift tax exemption threshold from $11.5 million to $3.5 million. Note that the current estate tax exemption is set to expire in 2025, so the reduction is effectively an acceleration of that expiration.
(Expected to generate $280 billion in revenue)

• Increase highest individual ordinary tax rate from 37% to 39.6%. (Expected to generate $150 billion in revenue)

Business Tax Provisions

• Increase the top corporate tax rate to 28% from 21%. Note that before it was reduced in 2017, the corporate
tax rate was 35%. (Expected to generate $1.05 trillion in revenue)

 

 

Individual investment positions detailed in this post should not be construed as a recommendation to purchase or sell the security. Past performance is not necessarily a guide to future performance. There are risks involved in investing, including possible loss of principal. This information is provided for informational purposes only and does not constitute a recommendation for any investment strategy, security or product described herein. Employees and/or owners of Nelson Capital Management, LLC may have a position securities mentioned in this post. Please contact us for a complete list of portfolio holdings. For additional information please contact us at 650-322-4000.

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