The long and tumultuous 2020 election continues to linger, and although the picture is beginning to get clearer there are still uncertainties. One thing is certain: should the outcome result in a democratically controlled Legislative Branch along with a Joe Biden Presidency, it would undoubtedly bring about significant changes throughout the country, including potential tax reform.
With the passage of the Tax Cuts and Jobs Act of 2017 (“TCJA”), the country saw the largest tax reform it had seen in decades. The tax plan proposed by the Biden campaign calls for significant deviation and reversals of provisions of the TCJA. While nothing is certain until legislation is written and passed, the Democratic control of the presidency and both chambers of Congress increases the chances of future legislation, that, to some degree, mirrors the tax plan presented by the Biden campaign.
In addition to content, the timing of any potential legislation also remains speculative. While many have expressed concerns about raising taxes while the country is still recovering from the economic recession caused by the pandemic, a Biden campaign policy advisor, Stef Feldman, recently indicated that “it is absolutely the right time to enact the Biden tax agenda…He’s [Biden] eager to enact his plan as soon as possible.”  However, analysts from the Urban Institute & Brookings Institution Tax Policy Center recently updated their analysis of the Biden tax proposals, now predicting that the effective date for most of the tax provisions would not be before January 1, 2022. 
In this article, blumshapiro will outline certain notable provisions from the Biden tax plan. This is not intended to be an exhaustive account of the entire Biden tax plan nor a complete resource. Rather, our objective is to provide awareness for how you may be impacted and to help you analyze whether future tax planning opportunities should be pursued.
For an in-depth account of certain aspects of the Biden tax plan, there are links to resources at the end of this article. Please note that the Biden campaign did not produce one official tax plan document detailing its various tax proposals. Instead, many of the proposed tax provisions listed below have been culled from multiple sources, including but not limited to; a brief campaign document posted on the campaign website titled, “A Tale of Two Tax Policies: Trump Rewards Wealth, Biden Rewards Work;”  statements regarding tax policy embedded in other policy plans for specific industries or areas; the “Biden-Sanders Unity Task Force Recommendations;”  and verbal statements made by Biden or his advisors during the campaign. In addition, our ability to interpret the specific impact of these provisions is somewhat limited because campaign tax proposals are generally more high level and lack detailed technical explanations.
Notable Tax Proposals from the Biden Campaign
- The statutory corporate tax rate would be increased from 21% to 28%.
- A new corporate minimum tax has been proposed that would impose a 15% rate on global book income of $100 million or more. This is expected to function similar to an alternative minimum tax.
- The benefits of the Section 199A/qualified business income deduction would be phased out for individuals with taxable income greater than $400,000.
- There would be an increase in the Global Intangible Low Tax Income (GILTI) rate to 21%, which would double the current rate of 10.5%. Additionally, it has been suggested that tax on GILTI may be imposed on a country-by-country basis.
- The Biden proposal suggests tax credits and incentives to incentivize domestic manufacturing (“Made in All of America”)
- The real estate industry will potentially be impacted. The Biden campaign had suggested potential changes to the §1031 like-kind exchange provisions as well as changes to effectively limit losses that may be utilized by real estate investors.
- Other industries might also expect to be impacted under the Biden tax plan such as in the pharmaceuticals and energy sectors to achieve certain policy objectives.
- Future tax credits may be available for small businesses to offset the cost of workplace retirement plans and provide increased availability to workers.
Many of the revenue-raising aspects of the Biden tax proposal for individuals apply only to those taxpayers with taxable income over $400,000. It has not been specified whether this threshold is to be adjusted for filing status.
- Tax Rates
- The top ordinary rate would be restored to 39.6% for taxpayers with income over $400,000. This reflects a return to pre-2017 tax reform when the top ordinary rate was dropped to 37%.
- Capital gains & qualified dividends have historically been subject to favorable capital gains tax rates. For top income earners, this rate is currently capped at 20% (plus 3.8% to the extent subject to the Net Investment Income Tax). Under the Biden plan, capital gains and qualified dividends will be subject to the top rate of 39.6% for individuals with over $1 million in income.
- The Section 199A/qualified business income deduction would begin to phase out for individuals over $400,000 in taxable income.
- Itemized deductions would be capped to 28% of value. Additionally, benefits would begin to phase out for individuals with taxable income over $400,000.
- Wages in excess of $400,000 would be subject to the OASDI portion of Social Security Tax.
- The Unity Task Force Recommendations included a recommendation to “limit the ability of wealthy taxpayers to defer and avoid taxes on income (especially that relate to financial investments).” Some professionals have speculated that this may suggest a “mark to market” requirement for financial investments. 
- The campaign proposals also provide for equalizing the tax benefits of retirement plans to incentivize low- and middle-income workers to save for retirement. Some professionals have speculated that this may be accomplished via a refundable tax credit.
- Tax Credits
- The child & dependent care credit would be increased to a maximum of $8,000 for low-income and middle-class families. In addition, the credit would be made refundable.
- First-time home buyers could receive up to $15,000 of refundable and advanceable tax credit.
- There could be temporary expansion of the child tax credit, depending on the progression of the pandemic and economic conditions. This expansion would increase the credit from $2,000 to $3,000 for children 17 or younger with an additional $600 for children under 6. The credit would also be refundable and allowable to be received in monthly installments.
- The tax plan also provides for several other tax credits and incentives targeted toward low and middle income families such as expanding the earned income tax credit, renter’s tax credit, exclusion of student loan forgiveness from taxable income, tax credit for families renovating distressed properties, and a variety of other tax credits focused on promoting energy efficiency.
Gift and Estate Tax
- Unrealized capital gains would be taxable upon death and seemingly subject to the proposed increase in capital gains and dividend rates, if applicable. Alternatively, the statements made by the Biden campaign could be interpreted to suggest elimination of the basis step-up at death. Under current law, the tax basis of assets owned by a decedent is increased to fair market value at death, essentially allowing beneficiaries to sell those inherited assets and avoid capital gains taxes on the appreciation that occurred before the decedent’s death.
- The gift and estate tax exemption amount would be reduced. The TCJA effectively doubled the amount of the gift and estate tax exemption. The current gift and estate tax exemption amount is $11.58 million per person and $23.16 million per married couple. Many are suggesting that Biden is looking to reduce the gift and estate tax exemption to the pre-TCJA levels.
blum is following the Biden tax plan closely and studying updates as they become available. Our Task Force is focused on analyzing proposed tax plans as well any future legislation and will provide updates and analysis as new information becomes available. Please reach out to your blumshapiro tax partner with any questions and to discuss specific planning strategies and opportunities.
Additional information on the available specifics of the Biden tax plan can be found via the following resources: