U.S. plans to launch largest tax hike since 1993
US President Joe Biden is planning a massive tax reform in 28 years, which he promised in his campaign. We tried to analyze what the reform will be like and what consequences it might have on the global financial market.
During the campaign, President Joe Biden proposed a tax plan that is significantly different from the policy and significant tax cuts introduced during the Trump presidency. Biden's plan will increase tax rates for individuals with an income of $ 400,000 and above, as well as for corporations, which will also be subject to a new minimum tax on accounting income.
In announcing his economical incentive plan, Biden outlined a number of important tax changes. The Biden administration's initial tax legislation efforts are likely to focus on enacting tax proposals related to economic revitalization, including incentives aimed at low- and middle-income families.
The maximum individual federal income tax rate will rise from 37% to 39.6%.
The corporate rate will rise from 21% to 28%; an alternative minimum tax of 15% will apply to corporate balance sheet income of $ 100 million and above.
Individuals earning $ 400,000 or more will pay additional payroll taxes.
The maximum child and dependent tax deduction will increase from $ 3,000 to $ 8,000 ($ 16,000 for more than one dependent).
Tax breaks will be offered for student debt forgiveness and credit for the first-time home buyer will be restored.
The real estate tax exemption will be reduced by about 50%.
It is difficult to predict or quantify the impact these tax changes might have on the value of corporate stocks and therefore on the value of stock portfolios and retirement savings, if any. Any impact on stock prices is likely to depend on the extent to which individual corporations have benefited from the provisions that Biden's plan was to cut or reverse. Regarding the AMT's proposed on-going earnings, a key factor will be the extent to which the earnings reported for financial purposes exceed the earnings reported on their corporate tax returns.
