The 2020 Presidential Election and its Effects on Tax Policy
By Juli Findling, Paralegal
Now that the excitement of the 2020 Democratic and Republican National Conventions are over, you may be understandably confused as to how all those promises extolled from the podium about taxes will translate to you.
As we have seen throughout this 2020 campaign season, Biden and Trump disagree on most things, including how Americans should be taxed. Trump instituted the lower tax/pro-growth Tax Cut and Jobs Act of 2017 (TCJA), while Biden leans toward a more progressive, re-distributive tax structure, like what’s outlined in the Biden-Sanders Unity Tax Force Recommendations.
KEY TAX LAW CHANGES BY CANDIDATE
Business Tax
- Current: 21% corporate rate, 20% pass-through deduction for QBI❶, TCJA❷ BEAT❸, 10.5% GILTI❹ rate
- Biden: 28% corporate rate, repeal 20% pass-through deduction for QBI if >$400K in income and for REIT❺ dividends, double GILTI rate, 15% minimum global book income tax, repeal like-kind exchange deferral for real estate, 6.2% payroll tax increase on employee wages over $400K
- Trump: Make 20% pass-through deduction for QBI permanent
Payroll/ Self- Employment Tax
- Current: 6.2% on wages up to $137,700 and 1.5% Medicare (both employer and employee), .9% Medicare >$250K MFJ❻/$200K (employee only)
- Biden: Impose 6.2% tax on wages >$400K (both employer and employee), wages between $137,700 and $400K not taxed
- Trump: Supports temporary payroll tax holiday as pandemic relief
Individual Income Tax
- Current: 37% maximum rate through 2025, reverts to 39.6%
- Biden: 39.6% maximum rate
- Trump: Make 37% rate and other TCJA changes permanent
Investment Income Tax
- Current: 20% maximum capital gains rate, 3.8% net investment income tax
- Biden: No preferential rate for capital gains for taxpayers with income >$1M, no financial transactions tax
- Trump: Supports indexing capital gains for inflation, further reducing the rate from the current 20% maximum
Estate and Gift Tax
- Current: Top rate of 40% with exemption of $11.58M through 2025, reverts to $5M (indexed from 2011)
- Biden: Return to historical $3.5M exemption, eliminate the step-up in basis for inherited assets
- Trump: Make TCJA changes permanent
❶QBI – Qualified Business Income, ❷TCJA – Tax Cuts and Jobs Act, ❸BEAT – Base Erosion and Anti-abuse Tax
❹GILTI – Global intangible Low-taxed Income, ❺REIT –Real Estate Investment Trust, ❻MFJ – Married Filing Jointly
In these tumultuous times, it’s difficult to predict what policy initiatives the winner of the 2020 presidential election is likely to pursue. However, given the backdrop of the economic devastation created by the COVID-19 pandemic and the enactment of a highly partisan tax reform measure in 2017, it seems certain that tax policy will take center stage.
Keeping up with the ever-changing tax landscape can be dizzying. At Hoffman & Associates, we offer the most up-to-date and effective solutions for your estate plan and tax filing needs. Contact us at (404) 255-7400 or info@hoffmanestatelaw.com to schedule a free consultation with one of our attorneys or tax experts.
