As congressional Democrats push ahead with plans to significantly raise rates on rich Americans and well-off corporations, wealthy investors are becoming more concerned about the potential for tax increases.
On Thursday, President Biden unveiled a revised framework to fund a $1.75 trillion spending package ($1,750,000,000,000). The new framework would include a 15% corporate minimum, a new surcharge of 0.002% Americans, tighter IRS tax enforcement, taxes for corporate stock buybacks, and higher taxes for U.S. companies’ foreign earnings.
NEW YORK – September 21: U.S. President Joe Biden addressed the 76th session of the U.N. General Assembly in New York City on September 21, 2021. (Photo by Timothy A. Clary–Pool/Getty Images). (Photo by Timothy A. Clary–Pool/Getty Images/Getty Images).
UBS Global Wealth Management has released a survey that questions the effectiveness of these increases. The survey included 3,000 investors and 1,200 owners of businesses with at least $1,000,000 in assets. A large portion of the respondents were looking for ways to move their money to avoid the increases taking effect.
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Nearly half of investors support Biden’s tax proposals. However, many stated that they want to make “smart moves” before rate increases ripple through their portfolios. A majority of U.S. investors are considering shifting assets that don’t generate adjusted gross income. 36% of those who have moved assets to trusts in advance of potential changes have already done so.
34% of investors increased financial gifting to their family and friends to help reduce tax liability. 39% also said they sought professional tax advice.
Despite the White House’s initial proposal for steep increases in corporate taxes and capital gains taxes, most of these plans have been rescinded by Sen. Kyrsten Silenza, D-Ariz. In the new Build Back Better plan, most of Trump’s 2017 tax law that significantly lowered corporate taxes and for well-off Americans will remain in place.
Janet Yellen, Treasury Secretary, listens to President Joe Biden in a meeting with corporate chief executives to discuss the looming federal deficit limit. (Photo by Chip Somodevilla/Getty Images / Getty Images).
The plan has more than enough money. It asks the most wealthy Americans and profitable corporations to contribute their fair share. The White House stated in a factsheet that it does not increase taxes on small businesses or anyone earning less than $400,000 annually. It will also stimulate economic growth, which will lead to increased tax revenue and a reduction in the deficit.
Biden’s plan has a new aspect: A reformed surtax on ultra-wealthy would impose an additional 5% tax on those with incomes above $10 million. Individuals with income over $25 million would see their rate rise to 8%, in addition to the 37% top income tax rate.
Although the White House estimates that the tax increases proposed by the administration could generate approximately $2 trillion in new revenue over ten years, Penn Wharton analysts determined that the actual figure is closer to $1.5 trillion.
The tax increases would be used to fund a huge expansion of the social safety net. This includes expanding Medicaid, universal pre-kindergarten and tax credits for clean energy. This spending plan does not include major progressive initiatives like paid family leave and free community college.
