Analysis Biden / Harris Tax Plan 2021 - 2024 : What Your Business Needs to Know Now

Updated: Jul 19

Regardless of who you voted for Trump or Biden, the reality is now that Joe Biden will be President of The United States beginning on January 20, 2021; sworn in on the West Front of the United States Capitol Building in Washington, D.C. Therefore, it is incumbent upon every family business owner and corporation to prepare for higher taxes and increased regulations that may follow with the new Biden / Harris administration taking the leadership helm according to

Already we're seeing family owned businesses rushing to lock-in current tax savings before the Biden administration takes office. For example, 1-800-FLOWERS.COM, Inc.(NASDAQ : FLWS), a leading ecommerce provider of products and services designed to inspire more human expression, connection and celebration, today announced that Jim McCann, Founder and Executive Chairman, and the McCann Family Trusts recently sold approximately 845,000 shares of, Inc. stock for purposes of family tax and estate planning. The sale represents approximately 2% percent of McCann’s and the McCann Family Trusts’ aggregate ownership position in the Company. McCann and the McCann Family Trusts retain beneficial ownership of approximately 40 million shares representing more than 51 percent of the Company’s total shares outstanding. McCann has informed the Company that he currently has no plans to sell any additional shares.

Biden Tax Plan Summary ...

  • President-elect Joe Biden, according to the tax plan he released would enact a number of policies that would raise taxes on individuals with income above $400,000, including raising individual income, capital gains, and payroll taxes. Biden would also raise taxes on corporations by raising the corporate income tax rate to 28% and imposing a corporate minimum book tax according to independent Tax Foundation Organization.

  • Biden’s plan would raise tax revenue by $3.3 trillion over the next decade on a conventional basis. When accounting for macroeconomic feedback effects, the plan would collect about $2.8 trillion the next decade. This is lower than we originally estimated due to the revenue effects of the coronavirus pandemic and economic downturn and new tax credit proposals introduced by the Biden campaign.

  • According to the Tax Foundation’s General Equilibrium Model, the Biden tax plan would reduce GDP by 1.62 percent over the long term.

  • On a conventional basis, the Biden tax plan by 2030 would lead to about 7.7 percent less after-tax income for the top 1 percent of taxpayers and about a 1.9 percent decline in after-tax income for all taxpayers on average.

Details of Biden Tax Plan

Biden’s plan includes the following payroll tax, individual income tax, and estate and gift tax changes:

  • Imposes a 12.4 percent Old-Age, Survivors, and Disability Insurance (Social Security) payroll tax on income earned above $400,000, evenly split between employers and employees. This would create a “donut hole” in the current Social Security payroll tax, where wages between $137,700, the current wage cap, and $400,000 are not taxed.[1]

  • Reverts the top individual income tax rate for taxable incomes above $400,000 from 37 percent under current law to the pre-Tax Cuts and Jobs Act level of 39.6 percent.

  • Taxes long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6 percent on income above $1 million and eliminates step-up in basis for capital gains taxation.[2]

  • Caps the tax benefit of itemized deductions to 28 percent of value for those earning more than $400,000, which means that taxpayers earning above that income threshold with tax rates higher than 28 percent would face limited itemized deductions.

  • Restores the Pease limitation on itemized deductions for taxable incomes above $400,000.

  • Phases out the qualified business income deduction (Section 199A) for filers with taxable income above $400,000.

  • Expands the Earned Income Tax Credit (EITC) for childless workers aged 65+; provides renewable-energy-related tax credits to individuals.

  • Expands the Child and Dependent Care Tax Credit (CDCTC) from a maximum of $3,000 in qualified expenses to $8,000 ($16,000 for multiple dependents) and increases the maximum reimbursement rate from 35 percent to 50 percent.

  • For 2021 and as long as economic conditions require, increases the Child Tax Credit (CTC) from a maximum value of $2,000 to $3,000 for children 17 or younger, while providing a $600 bonus credit for children under 6. The CTC would also be made fully refundable, removing the $2,500 reimbursement threshold and 15 percent phase-in rate.[3]

  • Reestablishes the First-Time Homebuyers’ Tax Credit, which was originally created during the Great Recession to help the housing market. Biden’s homebuyers’ credit would provide up to $15,000 for first-time homebuyers.[4]

  • Expands the estate and gift tax by restoring the rate and exemption to 2009 levels.

Biden’s plan also includes the following proposed business tax changes:

  • Increases the corporate income tax rate from 21 percent to 28 percent.[5]

  • Creates a minimum tax on corporations with book profits of $100 million or higher. The minimum tax is structured as an alternative minimum tax—corporations will pay the greater of their regular corporate income tax or the 15 percent minimum tax while still allowing for net operating loss (NOL) and foreign tax credits.[6]

  • Doubles the tax rate on Global Intangible Low Tax Income (GILTI) earned by foreign subsidiaries of US firms from 10.5 percent to 21 percent.

  • In addition to doubling the tax rate assessed on GILTI, Biden proposes to assess GILTI on a country-by-country basis and eliminate GILTI’s exemption for deemed returns under 10 percent of qualified business asset investment (QBAI).[7]

  • Establishes a Manufacturing Communities Tax Credit to reduce the tax liability of businesses that experience workforce layoffs or a major government institution closure

  • Expands the New Markets Tax Credit and makes it permanent.

  • Offers tax credits to small business for adopting workplace retirement savings plans.

  • Expands several renewable-energy-related tax credits, including tax credits for carbon capture, use, and storage as well as credits for residential energy efficiency, and a restoration of the Energy Investment Tax Credit (ITC) and the Electric Vehicle Tax Credit. The Biden plan would also end tax subsidies for fossil fuels.

Other proposals not modeled due to a lack of detailed information include:

  • Imposing a new 10 percent surtax on corporations that “offshore manufacturing and service jobs to foreign nations in order to sell goods or provide services back to the American market.”[8] This surtax would raise the effective corporate tax rate on this activity up to 30.8 percent.

  • Establishing an advanceable 10 percent “Made in America” tax credit for activities that restore production, revitalize existing closed or closing facilities, retool facilities to advance manufacturing employment, or expand manufacturing payroll.[9]

  • Equalizing the tax benefits of traditional retirement accounts (such as 401(k)s and individual retirement accounts) by providing a refundable tax credit in place of traditional deductibility.

  • Eliminating certain real estate industry tax provisions.

  • Expanding the Affordable Care Act’s premium tax credit.

  • Creating a refundable renter’s tax credit capped at $5 billion per year, aimed at holding rent and utility payments at 30 percent of monthly income.

  • Increasing the generosity of the Low-Income Housing Tax Credit.

Update to Analysis

NOTE : The Biden tax plan update now includes the proposal to expand the estate and gift tax by reducing the exemption amount to $3.5 million and increasing the top rate for the estate tax to 45 percent,[11] which has impacted the economic, revenue, and distributional estimates. The Biden estate tax update effects family businesses in particular nearly 85% of all businesses in The United States are essentially family run small businesses.

Adjusting Your Family Business Model to Biden Tax Plan

The coronavirus COVID-19 pandemic has accelerated by nearly a decade most business models for the long-term according to

The following business model enhancements are here to stay post COVID-19 ...

  • Nearly 35% of all office jobs will shift to work from home and almost 55% of workers will be given a hybrid option to work 2-3 days from home combined with 2 days or so in the office. This business model should save businesses nearly $8,000 annually per employee. And the employee saves nearly $9,500 annually due to less travel costs etc.

  • Business trips will become less lavish and uncommon as efficiencies of remote chat ie. ZOOM video conferencing / Google Video Meetings / Microsoft Teams ... may provide 90% savings rate vs business trip in-person travel expense.

  • Customer Pickup business model creates less overhead costs for restaurants, fast food and retailers, as the store size footprint as consumer behavior shifts to 60% greater eCommerce online buying patterns and less in-store foot traffic.

  • Automation will jump 2021 - 2024, as nearly 30% of jobs in The United States face elimination with the advent of cost saving robotics and artificial intelligent machines.

  • Carbon Tax is likely seep into the Biden policy mix between $10 to $25 per metric ton of carbon emitted. A carbon tax will push oil, gas and coal prices higher long-term. Businesses should begin now by incorporating clean energy and sustainable models.

  • Its a sure bet taxes will be higher and eventually interest rates will jump as well. Therefore, paying off any DEBT as costs increase should be a top priority.

Return on Investment online meetings

What Happens if Kamala Harris Effectively Becomes President during Biden Term ...

Joe Biden will take office at the age of 78 years old, so its not a huge stretch to suggest that he may not serve out a full-term as President. What happens if VP, Kamala Harris effectively becomes President. Here's a breakdown of Kamala Harris Tax Policies including:

  • Raising the top marginal income tax rate on the top 1 percent (up to 39.6 percent from 37 percent) according to independent Tax Foundation Organization.

  • Implementing a 4 percent “income-based premium” on households making more than $100,000 annually to pay for her version of “Medicare for All”

  • Creating a new refundable tax credit (the LIFT Act) that would be available to low- and middle-income taxpayers, designed to increase after-tax income to address the rising cost of living

  • Raising capital gains tax rates at the same rates as ordinary income, though it is unclear if Harris would do so only on a subset of taxpayers.

  • Raising the corporate income tax rate of 21 percent, established in the Tax Cuts and Jobs Act (TCJA), up to 35 percent

  • Expanding the estate tax to cover increased teacher compensation

  • Imposing a financial transaction tax (FTT) on stock trades at 0.2 percent, bond trades at 0.1 percent, and derivative transactions at 0.002 percent

Many of the details of Harris’ plans lacked specifics. However, there are a few shared policy ideas between the Biden and Harris plans. Among them, both candidates included:

  • Raising the top income tax rate on the top 1 percent of earners from 37 percent to 39.6 percent

  • Increasing the corporate income tax rate

  • Taxing capital gains and dividends at ordinary income tax rates

  • Increasing refundable tax credits for individuals

  • Harris has suggested the need for a carbon fee. Biden also responded to the idea favorably in an interview with CNN’s Anderson Cooper.

There are also notable differences between each candidate’s proposals:

  • Biden’s plan would increase the corporate income tax rate to 28 percent vs. 35 percent under Harris.

  • Biden would only apply ordinary income tax rates to capital gains on those filers with incomes over $1 million annually. It is not clear if Harris proposed applying ordinary income rates to all capital gains regardless of taxpayer income.

  • Biden has proposed eliminating the income cap on Social Security taxes and doubling the Global Intangible Low-Tax Income (GILTI) taxes. More information is needed on Harris’ stance.

  • Unlike the Harris plan, Biden’s campaign does not include an income premium to pay for any version of a “Medicare for All” program. In fact, the Biden campaign criticized Harris during the primaries over the issue, arguing that the Harris plan represented “a refusal to be straight with the American middle class” and would result in tax hikes for millions of families.

  • Harris has proposed a new refundable tax credit for low- and middle-income earners. Biden’s plan mostly expands current credits already enacted (e.g., Earned Income Tax Credit, New Markets Tax Credit, Renewable Energy Credits, etc.) in addition to offering new credits, primarily on the business side (e.g., a manufacturing communities tax credit and small business workforce savings plan credits).

  • Harris has proposed a financial transaction tax (FTT) on certain Wall-Street trades, including stocks, bonds, and derivatives. Biden has remained silent on whether he supports a tax on transactions.

Overall, both candidates support increasing taxes for corporations and higher-income-earning individuals. Additionally, both candidates endorse taxing investment income (e.g., capital gains and dividends) at ordinary income rates for certain filers and increasing the value of refundable credits for individuals and businesses that face increased marginal tax rate burdens.

Family Business Wealth Preservation ...

Now is a good time to begin taking steps to preserve family wealth. For seniors, it could be as simple as just giving ie. handing your wealth to your kids and grandchildren steadily overtime. Here are ways to preserve family wealth ...

  • Pay off your children and grandchildren's education debt ie. college debt

  • Buy gold and art work to pass on for generations. Given U.S. Debt exceeds $30 Trillion we've seen the value of the dollar (USD) drop put your faith in better managed entities

  • Buy stock INDEX FUNDS such as Vanguard Emerging Markets and Dividend Income Funds

  • Invest in residential real estate rental properties in tax friendly states such as Tennessee

  • Buy Annuity that provide legal and tax protections while guarantee income into your senior years

  • Develop a plan to transform your family business model into a sustainable organization long-term which reduces costs and builds on progressive ideas such as hybrid telecommuting, clean energy, eCommerce and automation

  • Setup TRUST to provide monthly income supplement to your kids and grandchildren for generations

  • Family business owners must culture new leadership and find rock-star leaders to begin transfer of ownership to next generations

  • Upgrade and maintain your home (s) real estate properties, so that its left in high quality condition ie. maximum resale value for next generation

  • Reduce your lifestyle expenses to a comfortable but cost effective level

  • Focus on your family healthcare and diet plans to reduce potential medical expenses into senior years

  • Dollar-cost averaging (DCA) / Constant Dollar Plan stay out of dollars (USD) put your faith in other investments and high quality managed company equity stocks assists family business owners with the following;

  • A clear goal and vision to leverage knowledge, people and skills

  • A business succession plan

  • Recruiting new faces to add more professional management

  • Proper governance structure which benefits family members

  • Diversification plan towards business growth

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