Wealthy Americans look to escape Biden's tax hikes
Biden's tax hikes spark alarm among investors, wealthy Americans
Cresset Capital founding partner Jack Ablin and NFJ Investment Group managing director R. Burns McKinney discuss Biden's economic framework as Democrats try to pass trillion-dollar spending packages.
Wealthy investors are increasingly concerned about the possibility of impending tax increases as congressional Democrats barrel ahead with a plan to substantially raise rates on well-off corporations and rich Americans.
President Biden on Thursday unveiled a revised framework for a roughly $1.75 trillion ($1,750,000,000,000) spending package, which would be paid for by a slew of new taxes, including a 15% corporate minimum tax, a new surcharge on 0.002% of Americans, stricter IRS tax enforcement, taxes on corporate stock buybacks and higher taxes on U.S. companies' foreign earnings.
NEW YORK, NEW YORK - SEPTEMBER 21: U.S. President Joe Biden addresses the 76th Session of the U.N. General Assembly on September 21, 2021 at U.N. headquarters in New York City. (Photo by Timothy A. Clary-Pool/Getty Images) ((Photo by Timothy A. Clary-Pool/Getty Images) / Getty Images)
But a new survey published by UBS Global Wealth Management calls into question the efficacy of these increases: According to the survey of 3,000 investors and 1,200 business owners with at least $1 million in assets, a large share of respondents are considering how to move their money before the increases take effect.
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While roughly half of investors said they support Biden's tax proposals, many said they wanted to make a "smart move" before the rate hikes ripple through their portfolios. An estimated 40% of U.S. investors are weighing shifting assets that do not generate adjusted gross income, while 36% have already moved some assets into trusts ahead of the potential changes.
On top of that, 34% of investors have increased financial gifting to family and friends, a popular way to reduce tax liability, and another 39% said they sought expert tax advice.
Although the White House initially proposed steep increases in corporate taxes, capital gains taxes and income taxes, the bulk of those plans appear to have fallen to the wayside after pushback from Sen. Kyrsten Sinema, D-Ariz. The majority of former President Donald Trump's signature 2017 tax law, which substantially lowered rates for corporations and well-off Americans, will likely remain intact in the newest Build Back Better plan.
Treasury Secretary Janet Yellen listens to President Joe Biden during a hybrid meeting with corporate chief executives and members of his cabinet to discuss the looming federal debt limit in the South Court Auditorium in the Eisenhower Executive Offi … (Photo by Chip Somodevilla/Getty Images / Getty Images)
"The plan is more than fully paid for by asking the wealthiest Americans and most profitable corporations to pay their fair share. It does not raise taxes on small business and anyone making less than $400,000 per year," the White House said in a fact sheet. "It will also generate economic growth that will increase tax revenue and contribute to deficit reduction."
One of the newer aspects of Biden's plan is the revamped surtax on the ultra-wealthy: It would impose an extra 5% rate on individuals with income above $10 million. That rate would climb to 8% for individuals with income above $25 million – in addition to the current top individual income tax rate of 37%.
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The White House has estimated the proposed tax hikes could generate about $2 trillion in new revenue over the next decade, although Penn Wharton analysts found the figure is actually closer to $1.5 trillion.
Money generated from the tax hikes would go toward funding a massive expansion of the social-safety net, including establishing universal pre-kindergarten, expanding Medicaid and providing clean energy tax credits. The spending plan notably excludes major progressive initiatives such as free community college and paid family leave.