Biden’s Tax Plan Simplified


MarketCycle Wealth Management

UPDATED on October 18th. 

The number one comment that I currently receive in emails and phone calls from clients, both Republican and Democrat, is that they worry about the effect of Joe Biden’s tax proposals if he is elected to lead the United States and that is what this month’s blog is all about.  A full 75% of Wall Street’s Chief Investment Officers are betting on a Joe Biden win and have positioned their client’s portfolios accordingly.  As I write this on September 1st, Biden is still ahead in the polls amongst likely voters, although this lead may not last since the country is so sharply divided right down the middle and roughly 45% of U.S. citizens do not bother to vote even in the best of years.  It is abundantly clear that 100% of President Trump’s core will vote (and likely in person), so the reality is that either candidate could win.  Because of the high amount of mail in ballots from Democrats, we may not know the actual winner for days to weeks after Election Day.  And of course, the results might be challenged.

Regardless, we have to keep in mind that stocks and politics are not the same thing.  I remember that when President Kennedy was assassinated, and this was an extremely bad political event, the stock market actually went up.


UPDATED CHART!  The following chart shows the changing betting odds on a Trump or Biden win from March 1st to October 18th.  Trump is shown in red and Biden is shown in blue.




President Trump’s tax plan has already been enacted during the past four years, although he now promises to also eliminate the ‘Payroll Tax’ that is designed to maintain Social Security and Medicare… this move would likely kill both programs by 2023.


Joe Biden’s tax plan is fairly easy to understand and, in my opinion, it would be easy for most people to tolerate.  If implemented, it would raise an additional $4-Trillion over the coming ten years; this is enough to cover the recent pandemic-caused increase in debt.  Anyone with an earned income of less than $400,000 per year pays no additional tax and may actually see some benefit.  Information to the contrary on social media is fake & false.  Small businesses also benefit.  Most of the tax increases affect only the top 1%.


Biden proposes 16 steps to his tax overhaul program:

  1. Increase the marginal tax rate back to 39.5% (from 37%) for anyone earning more than $518,400 per year.
  2. Increase the capital gains (investment) tax from 20% to 39.5% for anyone with an earned income of more than $1-Million per year. **  [If re-elected, President Trump plans to cut the capital gains tax for anyone with a salary higher than $1-Million per year from 20% to the 15% tax on sold-asset profits that most investors pay.]
  3. An increase in the corporate tax rate.  President Trump lowered it from 35% to 21%.  Joe Biden wants to push it up to a still low 28% as a sort of “meeting in the middle.”
  4. There are many companies, like Amazon, that pay no taxes.  He wants to implement a minimum tax of 15%.  Companies would still be able to carry net operating losses forward.
  5. There would be a minimum tax of 21% (up from 10.5%) on the patents of multi-national corporations.  These are often held in tax-haven countries.
  6. Simplify small business income deductions… increase the ability to use deductions in any small business that makes up to $400,000 per year.
  7. Re-institute the 12.4% payroll tax (that pays for Social Security and Medicare) on anyone making more than $400,000 per year.  The concept is that even though the rich do not need Social Security or Medicare, they should still pay their fair share toward it.
  8. Eliminate the stepped-up basis in estates.  Heirs would no longer inherit assets that had increased in value without paying tax on the profits and this includes both investments and homes.  One effect would be for individuals to no longer do “buy & hold” in their investment accounts and IMO, this would be a good thing.
  9. There is some talk about instituting a tiny transaction fee on all investment trades.  The effect would be to lower volatility in the markets while bringing in a truly huge amount of tax revenue from day traders and high-frequency trading hedge funds.  Client accounts in MarketCycle Wealth Management might have to pay as little as $1 per year toward this fee… fairly insignificant.  I’m a big proponent of this fee.
  10. Banks with over $50-Billion in assets would be required to pay a yearly fee to strengthen the FDIC insurance on all customer’s accounts in all banking institutions.
  11. Itemized deductions to 28% regardless of one’s tax bracket… meaning that if you give $100 to charity, you can take $28 off of your taxes.
  12. Child care tax credit raised from $2000 to $8000 for any dependents under the age of 13 or for any person that is a disabled & dependent adult.
  13. Institute tax credits for any first time home buyers of a one time $15,000 deduction to be used toward mortgage payments or bank fees.
  14. Increase the incentives to contribute to a retirement plan such as an IRA or SEP.
  15. Maintain the Payroll Tax so that people will continue to receive the ‘old age’ safety nets of Social Security and Medicare that they have pre-paid for all during their working years.
  16. Made in America?  Biden wants to add a 10% surtax on the profits of any company that deliberately makes goods overseas that are then sold back into the United States.  He wants to decrease the taxes of these same companies that move manufacturing back to the United States and that create jobs in the United States and he wants to permanently close loopholes created by President Trump that allow these same companies to game the system (some currently pay 0% tax).

** = The top 1% own more than 50% of all stocks, so the increase in capital gains taxes on anyone earning a salary of greater than $1-Million per year would bring in a lot of tax revenue. (Data from the Federal Reserve):


I just watched a very important and well done documentary on Netflix that explains why we, as a people, may be so politically divided:  The Social Dilemma



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MarketCycle Wealth Management | Stephen Aust
MarketCycle Wealth Management, LLC is a Registered Investment Advisor. Information presented is for educational purposes only, is not considered an individualized recommendation or personalized investment advice, may not be suitable for everyone and does not intend to make an offer or solicitation for the sale or purchase of any securities. All investments involve risk and unless otherwise stated, are not guaranteed. Past performance or performance charts are not a guarantee of future performance. Portfolio performance charts are shown net of fees so the management fee, brokerage fees, trading fees and ETF fees have already been subtracted. Current performance may be higher or lower than that shown and differing accounts may show different results. Investment returns and principal value in client accounts will fluctuate. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Be sure to consult with a tax professional before implementing any investment strategy.