Potential Tax Increases Ahead - What You Need to Know

(Belle Haven Investments Opinion) -- As you may already know, the government is considering raising taxes to help cut the deficit by $3 trillion. This would lead to higher tax burdens passed on to your clients in multiple ways like, corporate tax, capital gains, income tax, while also helping to block many loopholes tax payers currently use. Below is a summary of some of the proposals that may impact your clients. Source: Tax-the-Rich Budget - Bloomberg

Income Taxes: Biden proposal would raise the top personal-income tax rate to 39.6%, from 37%, for those making more than $400,000. This is in addition to an expansion to the ACA tax (aka Obamacare Tax) to all incomes and increasing it to 5% from 3.8%. This will mean that the top marginal tax rate will be over 45%.

Billionaires Tax: Biden is proposing a 25% minimum tax rate on the wealthiest 0.01% of taxpayers. This would also block the richest Americans who pay an 8% rate on their incomes because of tax preferences that allow them to cut their IRS bills.

Corporate Taxes: The proposal would increase both the corporate-tax and foreign earnings tax corporations face. The corporate-tax would increase the top rate to 28% from 21% while foreign earnings would double to 21%, from the current 10.5%.

Capital Gains: Proposing to increase the capital gains rate from 20% to 39.6% for people earning at least $1 million. This means the richest taxpayers would pay 44.6% federally on investment income and other earnings.

How taxes may affect the municipal bond market: With supply already limited, we expect this may lead to further demand for tax-exempt income. With these pending taxes over the horizon there is no better time to consider municipal bonds to help your clients minimize the impact of these tax changes. Don't be the last one on the train when it comes to investing in municipal bonds. If you wait too long to invest, you may miss out on potential opportunities to earn higher returns or lock in favorable interest rates that we haven’t seen in recent years.

Mason Durand
Vice President, Advisory Solutions
Belle Haven Investments

This article was written by an independent third party. It is provided for informational and educational purposes only. The views and opinions expressed herein may not be those of Guardian Life Insurance Company of America (Guardian) or any of its subsidiaries or affiliates. This does not constitute a solicitation, offer, or recommendation of a strategy or to purchase or sell a security.


Jeremy Suarez

Jeremy has been in the financial advisory business since 2005 after graduating from Fordham University’s School of Business. He joined Tomoro as a managing partner in 2014. During his tenure, Jeremy has consistently excelled as an advisor in both the personal household and business planning arena. As a managing partner, Jeremy also serves as a mentor to all associates and is hands-on in supporting Tomoro’s growth planning. He has completed various curriculums and certifications, such as New York University’s graduate studies in financial planning, is a Certified Exit Planning professional, and Investment Advisor Representative. He and his family reside in Colts Neck, NJ.

Registered Representative and Financial Advisor of Park Avenue Securities and Financial Representative of Guardian, AR insurance license #8401385 CA insurance license #0F94382

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Statistics sources from Central Bank Rates and Bloomberg.

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