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Shah CPA Firm, PLLC
Trump vs. Harris Tax Policies
Tax policy is an issue in this year's US Presidential Election 🗳 - as it should be. When a person thinks about starting a new business, that person formulates a business plan, which rationalizes the top line revenue and expenses. Top line revenue is reflected in a government's tax policy - it's the main source of the government's gross receipts. Agenda items are akin to a business's expense items - how will the government spend its money. It is very important to understand both sides - tax policy and agenda items. This way the voters can make an educated and informed vote.
Understand the Tax Policies
It is easier to make cast a vote when you have policies to consider. Both Trump and Harris presented their ideas, and for the large part - the policies are polar opposites. It is important to educate yourself because these policies will impact you.
Some of the tax jargon can go above people's heads, so I add my takeaways to educate and even offer planning strategies according to the different outcomes of the election.
Tax Policy Influences Behavior
Tax policy influences behavior. Think about it. One of the reasons why there are tax incentives for home property taxes and home mortgage interest is to influence society to own their own homes 🏠 rather than renting. A community is better off if people take care of their property and neighborhoods. This happens if people are vested in the community they live in. A home owner will have a different mindset compared to a renter.
LONG-TERM CAPITAL GAIN. Similarly, when the tax code gives preferential treatment towards long-term capital gains, one reason is to provide more stability for companies to make responsible decisions for the long-term, instead of making foolish short-term decisions.
STEPPED-UP BASIS. Eliminating stepped-up basis will create significant issues especially for families who have their wealth tied up in illiquid assets like real estate, family businesses or farms. Without planning, you will find owners making fire sales just to cover tax liabilities or purchasing insurance to do the same.
Proposed Trump Tax Policies
🟥 Donald Trump and JD Vance would impose a universal baseline tariff on all U.S. imports 🇺🇲, impose a 60 percent tariff on all U.S. imports from China 🇨🇳, make the individual and estate tax cuts of the TCJA permanent, lower the corporate income tax rate from 21 percent to 20 percent, tax large private university endowments
- Lower the corporate income tax rate from 21 percent to 20 percent.
- Exempt tips from income taxes.
- Tax credit for family caregivers.
- No SALT cap (state and local tax payment deductions).
- Make the expiring estate tax cuts from the 2017 Tax Cuts and Jobs Act permanent. Keep individual tax rate down, capital gains tax low, standard deductions up, increased child tax credits, and increased estate tax exemptions.
- Tax large private university endowments.
- Impose a universal baseline tariff on all U.S. imports.
- Impose a 60 percent tariff on all U.S. imports from China.
Source: https://taxfoundation.org/research/federal-tax/2024-tax-plans/
NEERAJ'S TAKEAWAY. Much of Trump's tax policy is aimed to revert back to the incentives that helped generate the economic activity of the country and make taxes less burdensome for working families, investors and estates. Incentives also aimed at generating goods domestically rather than importing from abroad (especially China).
Proposed Harris Tax Policies
🟦 Kamala Harris and Tim Walz rolled out their tax policy 80 days from Election Day, November 5th. Quick, let's understand the proposal. Phew! Harris carries forward much of the old Biden-Harris proposals. The Harris-Walz plan is low on detail, so we revert back to the Biden-Harris proposal - namely, increase tax rates on corporate, individual, and capital gains income; expand tax credits for workers and families 👨👩👧👦; expand tax bases to include more types of income
- Increase the corporate income tax rate to 28 percent.
- Tax long-term capital gains and qualified dividends at ordinary income tax rates for taxable income above $1 million and tax unrealized capital gains at death above a $5 million exemption ($10 million for joint filers).
- Increase top individual income tax rate to 39.6 percent on income above $400,000 for single filers and $450,000 for joint filers.
- Eliminate stepped-up basis on assets received by inheritance.
--> Kamala Harris indicated that she supports Trump's idea of not taxing tips.
Source: https://taxfoundation.org/research/federal-tax/2024-tax-plans/
NEERAJ'S TAKEAWAY. Much of Harris's tax policy is aimed at increasing taxes for corporations and investors. Long-term capital gains would be taxed at ordinary income tax rates and higher income families to be taxed at a much higher rate. Those receiving appreciated assets upon inheritance will be taxed more heavily.
Tax Strategies that Embrace Election Results
Quite often, government tax policies influence behavior. The tax code is one source when people make decisions about their money. There are three scenarios to consider - with clear mandate in mind. Here are NEERAJ'S TAKEAWAYS:
🟥 TRUMP-VANCE WINS WITH CLEAR MANDATE. Relax. The benefits enjoyed with the TCJA will likely be extended. No need to panic. Increase long-term investment in US equities. Foreign goods will likely cost more. Incentive to buy American.
⬜️ NEITHER WINS WITH A CLEAR MANDATE. The TCJA will likely expire in 2025. It will be a mad rush to seek out your estate planning attorney (me) and CPA (also me) to take advantage of higher estate tax exemptions before the death tax dollar exemption takes a nose dive. Incentive to sell long-term assets at a gain before capital gain tax rates increase.
🟦 HARRIS-WALZ WINS WITH A CLEAR MANDATE. Get educated on stepped-up basis and learn how the elimination of this tax concept will lead to a higher tax bill - and often liquidity problems. The TCJA will expire in 2025. Crazy mad rush to seek out your estate planning attorney (me) and CPA (also me) to take advantage of higher estate tax exemptions before the death tax dollar exemption takes a nose dive. Sell long-term assets at a gain quick because tax bills on investments will increase. Purchasing insurance may be a part of a comprehensive plan, especially if assets of a decedent is tied up in illiquid assets like real estate, a family business or farms.
Bottom Line
Do you agree that the tax code can change, often from one administration to the next?
If so, a good strategy leverages times when the code works for you, and to be cautious when the code is against your personal situation.
We understand the tax code and can provide clarity to your tax strategies. Call 585-388-8388.
- Neeraj Shah, Esq., MBA, CPA
Election Odds: US President
Early Voting Turnout Data (pick your favorite state): https://election.lab.ufl.edu/early-vote/2024-early-voting/
Pennsylvania Voting Turnout: https://election.lab.ufl.edu/early-vote/2024-early-voting/2024-general-election-early-vote-pennsylvania/
Lott's Election Betting Odds: putting your money where your mouth is
https://electionbettingodds.com/
270 to Win: cool pie charts by states using an average of most recent polls
https://www.270towin.com/2024-presidential-election-polls/
270 to Win: Electoral Maps based on different scenarios: cool maps presenting the red and blues of our states
https://www.270towin.com/2024-presidential-election-forecast-predictions/
538 Poll National Polls: accounts for recency of polls and sample size
https://projects.fivethirtyeight.com/polls/president-general/2024/national/
538 Simulator: includes economic "fundamentals" - the owners of this visual look at historical data going back decades.
https://projects.fivethirtyeight.com/2024-election-forecast/?cid=rrpromo
Economist Odds of Winning: takes into account economic fundamentals and states historical voting patterns.
https://www.economist.com/interactive/us-2024-election/prediction-model/president
The Hill: Lead based on Polls
https://elections2024.thehill.com/national/harris-trump-general/
New York Times National Polling Average
https://www.nytimes.com/interactive/2024/us/elections/polls-president.html
Real Clear Politics Poll: shows a beautiful list of recent polls - and marks the point when Biden dropped out.
https://www.realclearpolling.com/polls/president/general/2024/trump-vs-harris
Get Out and VOTE!
Early Voting Begins Saturday October 26th
Saturday, Sunday, Monday, Wednesday & Friday | 9 am - 5 pm
Tuesday & Thursday | 12 - 8 pm
2024 Early Voting Sites - NEAR PENFIELD
Penfield Bay Towne Plaza - 1900 Empire Blvd (PENFIELD)
Perinton Square Mall - 6720 Pittsford Palmyra Rd (FAIRPORT)
Pittsford Town Court - 3750 Monroe Ave (PITTSFORD)
Webster Justice Court - 1002 Ridge Rd (WEBSTER)
Full detail of all Monroe County Early Voting Sites: https://www.monroecounty.gov/elections-earlyvoting
Bring Back Saturday Morning Cartoons
Life was so much more simple back in the 80s. It wasn't just Saturday morning cartoons, it was the after school cartoons that we kids sat around our big box TV 📺 to watch while having our after school snacks. We used to watch the evening news as a family. Even prime time shows were more of a family affair. Our phones had cords ☎️, but we would talk for hours with friends and family. Life was good.
Back in the day, family and friends could disagree and still sit down around the dinner table and enjoy each other's company. Today, we throw out lifelong relationships over political beliefs. Isn't that crazy? Today, eating dinner together as a family is a novelty instead of the norm. Today, we tend to text each other and call someone only when we need something.
I want to go back to simpler times. I want my friends back. I want my family back.
Bring back Saturday morning cartoons!
Let's Reunite
Let's unleash America's potential. Our neighbors, our friends, and our families are not our enemies. We should be able to have differening views, while continuing to have meaningful relationships. We can all do better. Let's reunite! 🤝
Neeraj's hat trick - CPA, attorney and MBA
CPA - expertise when it comes to money 💰
- identify and solve financial problems
- handle financial responsibilities
LAW - expertise when it comes to managing risk 🪂
- recognize potential risk
- help guard against these risks
MBA - expertise when it comes to business strategy 🎲
- think critically about business
- understand business concepts
Strong ethics
Taxpayers are ultimately responsible for all the information on their income tax return. This is true regardless of who prepares the return. Having an ethical preparer will give you confidence on the content of your return. It is 100% better for all parties involved to place ethics as priority #1. Don't try to pull a fast one on the IRS.
Neeraj does not compromise one bit on ethics – always following rules to the “T” and expects clients to have the same mentality. No exceptions!
You are probably paying more for your tax preparation than our rates. We are here to support you, and we won't let you down. Don't opt for an inferior product; your refund depends on it! Don't wait until you get all your forms.
Call to schedule your appointment, (585) 377-0700.
