The election is over and we are going to have to prepare for a Biden presidency and associated tax implications. After hinting at a repeal of the Tax Cuts and Jobs Act, promising to not raise taxes on anyone making less than $400K, and bouncing other ideas throughout the campaign, it’s important to start looking at what’s on the horizon.
Luckily, a recent brief from Deloitte sought to address some of the questions that company leaders have, discuss the potential tax changes, and determine what “fair share” might mean in a country that formerly had the highest statutory corporate tax rate in the developed world.
Priorities and Pressing Issues: What Biden Hopes to Address
Whether it’s focusing on stabilizing the economy after the pandemic or getting another relief bill through, one of the top goals appears to be revenue.
Expecting gross revenue between $3 and $4 trillion in the next ten years, Deloitte notes that “funds are not expected be used to pay down the debt, but are instead intended to offset other investments in such areas as climate change, health care, infrastructure, and college affordability, as well as to provide tax relief for lower- and middle-income taxpayers.”
Additionally, Deloitte highlights other pressing issues and the collection strategies to address them:
Removing the 20% Qualified Business Income Deduction on S-Corps
Following the introduction of a 20% deduction for qualified business income of pass-through businesses in the TCJA, this looks to be one of the first things the Biden Administration looks to eliminate. Despite the deduction playing a significant role in helping small businesses, providing tax savings of roughly $50 billion per year from 2021 through 2025, this is likely one of the easier things to sell.
Global Book Income
To address that too many companies pay $0 in federal income taxes, the administration is considering a 15% minimum tax on global book income for corporations with reported revenue of at least $100 million in their financial statements.
Reducing Overreliance on Foreign Nations for Supply Chains
The first priority discussed by Deloitte is the Biden Administration’s plan to continue reshoring jobs. On top of a 28% corporate tax rate, Biden proposes a 10% “offshoring tax penalty” on net profits earned by foreign subsidiaries. Additionally, the plan looks to strengthen anti-inversion rules and establish claw back rules for offshoring.
Focusing on Specific Sectors
Whether it’s eliminating credits and deductions or investing in green energy, the Biden Administration plans to pick winners. His tax plan instead seeks to spur investment in renewable energy, energy efficiency, and green jobs by, for example, expanding tax credits for production of and investment in renewable energy (such as wind and solar) and bolstering tax incentives for carbon capture and sequestration.
Targeting Pharma and Financial Institutions
Biden also plans to impose a “risk fee” on certain large financial institutions (those with more than $50 billion in assets), as well as penalize pharmaceutical companies that raise drug costs by more than the rate of inflation.
Learn more in Questions to Ask about Tax Changes under a Biden Presidency.
A Lot of Change on the Horizon? Prepare for It
Taxes continue to change, and changes will continue to take place. If you want to stay ahead of the tax world and discuss strategies with your peers, we invite you to join the Controllers Council! Our forum and live events will be there to provide you with all the latest information and insights on getting the most out of your revenue. Click here to learn more about the benefits of joining.