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In this month’s article of “What Would Your Financial Adviser Do?”, we are covering Biden’s tax plan on the rich and how it will affect you.

In the past five months since President Biden’s inauguration, financial advisers have waited eagerly for the new president to unroll his plans out on the rich. Although they may have been waiting, that doesn’t mean they haven’t been preparing. Numerous funds have already shifted over the process of closing out stocks, relocating investment plans, and planning for the worst yet to come. As we see almost all markets in every sector on bull runs and hitting new highs weekly, many advisers know a drop is inevitable.

Although the selling of assets does bring on a steep capital gains tax as of now at 20%, Biden plans to double that. This is putting investors in a tough situation on whether they want to hold through till the next election, hoping for a lower tax rate motivated president or sell now and secure profits.

Capital gains tax isn’t just the only tax Americans have to worry about on Biden’s agenda. Biden plans to raise the corporate tax from 21% to 28% has many corporations on the edge of their seats as they scramble to find plans on how to expand and compete in global markets.

Biden promised in his proposal to help small businesses get back on their feet as the Covid-19 pandemic devastated small businesses across the United States. Surprisingly Biden still plans to implement a higher tax rate that will hit 39.6% in some regions of the country. A very high number when compared to the past party’s 29.6 percent under Trump. Janet Yellen recently said that “The Biden Administration is not going to propose policies that hurt small business or Americans.” Although the tax may be higher on small businesses, the Biden administration has many plans to not only keep small businesses afloat but have them exceed expectations in this already tainted pandemic economy.

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So, what does this all mean for the average middle-class American? Well, not much apparently to the Biden Administration. Jen Psaki, the White House press secretary, stated in March that “The President remains committed to his pledge from the campaign that nobody making under $400,000 a year will have their taxes increased”. That number applies to families making over $400,000 a year, not individuals. With these changes in the government tax plan, many middle-class Americans still think dark clouds are to come in their future; and they aren’t wrong. Goldman Sachs analysts have predicted that Biden’s tax plan would reduce 2022 earnings-per-share on the S&P 500 by 9%, affecting many American portfolios. Taxes may not be increased for middle-class American’s, but the impact from the top 1% will trickle down for years to come.

To answer the question “What Would Your Financial Adviser Do” we must remember that Biden is after the rich. He wants those corporations to stop ripping off the government and pay their dues. Be prepared for bear markets to come, and as always, have extra cash on hand to take advantage of buying opportunities and assess your overall risk tolerance.

Written By

Samuel Shostek

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