George H.W. Bush was the last person to be elected President after serving as a Vice President. Presidential candidate Joe Biden would be the first in over 30 years. Without many modern day examples, it is difficult to gauge the influence of a Vice President’s positions on actual U.S. policy, although Dick Cheney was highly influential on the policies of President George W. Bush. History aside, there are reasons to believe that the positions of Vice Presidential candidate Kamala Harris would be a strong influence. Her role as a former District Attorney and subsequently Attorney General of California is one significant reason. Another reason is that Biden, who would be 78 at the time he takes office if he wins, would be the oldest person to become President in U.S. history. With these factors in mind, it is time to examine, compare, and contrast Harris’s tax policies with Biden’s.
Where the Harris and Biden Tax Plans are Similar
The logical place to start is where the two have the same or similar policy positions. Although it is a short list, both call for:
- An increase in the top marginal tax rate from 37% to 39.6%; and
- Taxing capital gains at ordinary tax rates for taxpayers with higher incomes.
Both also call for corporate tax rate increases and other changes to the 2017 tax law commonly known as the Tax Cuts and Jobs Act (TCJA). However, there are substantial differences over the manner in which each would carry out those endeavors. For example:
- Harris’s maximum corporate tax rate would be substantially higher than Biden’s — 35% compared to 28% (the current rate is 21%); and
- Harris has at times called for a full repeal of the TCJA, while Biden has called for a more limited repeal to affect those with incomes of more than $400,000.
Where the Harris and Biden Tax Plans Differ
Other substantive differences exist between the proposals of the two individuals, such as additional taxes and credits endorsed by Ms. Harris. These include:
- A 4% income premium to pay for a version of “Medicare for All”(Biden has not embraced Medicare for All or any specific new taxes designed to pay for healthcare);
- A financial transaction tax of 0.2% on stocks, 0.1% on bonds, and 0.002% on derivative transactions;
- An increase in the estate tax to pay for educator salaries (Biden favors removal of the step-up in basis obtained by heirs to an estate);
- Under the LIFT Act, a refundable tax credit for low and middle class taxpayers that would match earned income up to $3,000 for single filers earning less than $30,000, or $80,000 for single individuals with children (Biden instead favors increases to the Earned Income Credit and the Child and Dependent Care Credit);
- A carbon fee imposed on those who produce carbon emissions (Mr. Biden has not ruled this out but has no formal carbon fee proposal); and
- The Rent Relief Act, which would provide tax credits to individuals to pay rent.
For his part, Biden has policy proposals that are not matched by Ms. Harris. These include:
- Applying the social security payroll tax to wage income above $400,000;
- Doubling the GILTI tax rate to 26.25% (Harris does not mention GILTI, but a full repeal of the TCJA would eliminate GILTI entirely);
- Reactivating the limitation on itemized deductions for incomes above $400,000;
- Limiting the tax benefits of itemized deductions to 28%, which would mean (under 2020 tax brackets) that individuals with income over $326,600 (married filing jointly) or $163,300 (single) will have the benefits of itemized deductions reduced (Harris would instead reinstate the “Pease limitation” through the TCJA repeal);
- Repealing the step-up in basis for items transferred at death;
- Phasing out the qualified business income (QBI) deduction for those with income above $400,000 (Harris would instead repeal the QBI deduction by the TCJA repeal); and
- Imposing a new corporate minimum tax on corporations with book income over $100 million, which would primarily target companies that report little to no taxable income but report significant income for financial accounting purpose.
What This Means for the 2020 Election
As one can see from these comparisons, both candidates would increase taxes, particularly for wealthy individuals. As with our comparison between the tax plans of Biden and President Trump, there again are significant differences, though the differences between the tax proposals of Biden and Harris are less ideological and more practical. For more information on the 2020 candidates’ tax plans and their potential effect on you or your business, please contact us.
Bill Smith is a Managing Director for CBIZ MHM’s National Tax Office. He can be reached at 301.907.2412 and firstname.lastname@example.org.
Copyright © 2020 CBIZ & MHM (Mayer Hoffman McCann P.C.). All rights reserved. CBIZ and MHM are separate and independent legal entities that work together to serve clients. CBIZ is a leading provider of tax and consulting services. MHM is an independent CPA firm providing audit and other attest services. This article is protected by U.S. and international copyright laws and treaties. Use of the material contained herein without the express written consent of the firms is prohibited by law. Material contained in this alert is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their business.