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The Real President Biden Tax Plan

biden tax plan graphic of taxes

It is now clear President Biden and his administration have decided to govern from a far-left, progressive perspective and implement that agenda on the American people which will undoubtedly include higher taxes on all working Americans across the board no matter how “rich” or “wealthy” you may or may not be individually. Let’s outline the “why” with what we know.

On January 28th, 2021, the newly elected President Biden issued an executive order ordering the Treasury to earmark $4 Trillion accordingly: $2 Trillion to Covid relief efforts and $2 Trillion under the banner of global warming. In comparison, President Obama increased the national debt by more than $9.3 Trillion. For perspective, $9.3 Trillion is a larger increase to the national debt than all prior presidents combined. On top of that, not far behind was President Trump who increased the national debt by more than $7.8 Trillion. That’s $17.1 Trillion combined in twelve years! Stunning. President Biden is expected to exceed both of his predecessors especially after ordering $4 Trillion in new spending just by a stroke of a pen from the resolute desk. With this, the United States National Debt is expected to exceed $30 Trillion by President Biden’s first term. This should be concerning for all Americans.

But why? Why should this concern you? Let’s examine further. Currently, the U.S. National debt is more than $27,846,263,000,000… as I write this article it has already increased to $27,846,584,000,000, which does not include the additional $4 Trillion President Biden outlined today. So, why should this concern you? Because you need to know that taxes in all facets across the board will need to be increased on all Americans just to pay the interest on the debt from the substantial increases to U.S. Government spending in the past twelve years on top of the additional $4 Trillion this week. 

Relative to unprecedented government spending another major concern for us all should be U.S. Government bonds and the U.S. Dollar. People all over the world buy U.S. Government bonds because it is considered a safe investment. However, once the U.S. Government bond interest cannot or isn’t able to be paid, they go into “junk status” and the bonds become a riskier investment. Fewer people around the world will buy them and the bond market will dry up quickly, which would then lead to less money flowing into the U.S. Treasury rapidly and an ultimate collapse of the U.S. dollar – your U.S. dollar. That is not good for the U.S. Government and more importantly, the American worker paying federal taxes. So, now what? As of now, the American worker can expect higher costs in all facets – higher gas prices, higher food costs, higher federal taxes including social security and capital gains as well as increased taxes on U.S. corporations, inflation, and a higher cost of living. Let’s explore.

Gas prices. Gas prices will increase because federal gas taxes will be increased. President Biden’s Treasury Secretary is expected to propose higher gasoline taxes across the board to help fund the newly minted $2 Trillion-dollar executive order by President Biden to help fight global warming and/or climate change. Everyone will see higher gas prices because of these increased gas taxes at your local gas pump.  For example, if you drive to and from work every day or every other day due to Covid, working remotely you can expect gas prices to go up another $0.50 to $0.60 higher per gallon than it already is now. I just paid $2.25 and in New York gas prices have already climbed $0.12 on average since President Biden took office.

Additionally, on Long Island, gas prices have already increased more than $0.12 per gallon which in part is due to price gouging by private gas and oil companies. These companies know the Federal Government is moving to substantially increase federal gas taxes so the gas and oil companies are making counter moves by increasing gas prices as much as they can. This will allow them to stockpile as much cash as they can so they can pay Uncle Sam when the bill comes late next year. Secondarily related to this, you can expect your home heating bills to increase similarly because those same Federal gas taxes will also be levied on national gas and heating companies who provide heat to our homes and then passed on to us.  

Corporate taxes. Very soon the Democratic Congress will propose to raise corporate taxes across the board which will lead to fewer private-sector jobs in the corporate arena and will further raise federal income taxes and social security taxes on Americans making over $400,000 in total income. For example, if you have a W2 grossing more than $400,000 per year, you will see less of that money in your monthly or bi-weekly paycheck deposit because more is being withheld for Social Security taxes and federal income tax withholdings required by the Treasury.

Capital Gains. The Biden administration is also expected to implement higher capital gains taxes to the extent of your ordinary income tax rate. For example, if your ordinary income tax rate is 35%, you sell a profitable stock and net $1,000. Uncle Sam is going to levy a tax on your stock profit at a rate of 35%, taxing you $350 on a net capital gain of $1,000. This will ultimately depress the stock market and drive down the value of all 401k and IRA investments including any and all mutual funds you may have within those same 401ks and IRAs. In simpler terms, you will see the stock market, the NASDAQ, and other indexes take a marketable decrease in value mainly because U.S. corporations and wealthier Americans involved in their investments will not invest more of their monies in what is a penalizing capital gain environment.

Lastly, what we will also see eventually is a tax on your internet usage. Upcoming, you will see the Biden administration along with Senate and House Democrats who control both branches, will submit a tax proposal to tax internet and/or Wi-Fi usage of some type. This is similar to how AT&T and Verizon are federally taxed, ultimately passing increased taxes onto us via our internet bills. 

In summary, I want to again point out the why – why this new administration is increasing all of these taxes.  It’s simple – it has to! With such an increase in federal spending and more to come, the Federal Government sees no other option than to increase taxes across the board. It all ties back to the massive increases in Government spending and the national debt! In the simplest terms, the Biden administration is attempting to prop up the U.S. Government aka the U.S. dollar per increased taxes. More tax revenues will flow into the U.S. Treasury so that the U.S. Government can pay the interest required on outstanding U.S. bonds and so that the U.S. Government does not default on those U.S. bonds!

So, what can I do, personally? In my analysis, I’d suggest we stockpile as much cash as possible. I plan to cut my spending by 25-30%. Secondly, I’m holding onto my investments. I’ll continue to contribute to my 401k and IRA’s with no plan to liquidate. If you feel you need or want to sell, I’d suggest having “puts” in place with your broker and discuss with him or her so that you can lock in your minimum profits. Lastly, I’d contact my CPA, Attorney, and/or investment advisor to plan the upcoming 2021 tax year. I know all of us here at Strothman and Company would love to help you in any way we can so that you can better understand what you can do financially so to better protect your assets, your investments, your business, and more importantly your family.  

Author: Dustin Wells

Dustin is an Enrolled Agent with the Strothman and Company Tax team and has been with the Firm since 2019. He has nine years of experience working for the Internal Revenue Service before transitioning his career into public accounting. Utilizing his IRS experience he specializes in assisting clients with tax representation at the federal, state, and local levels in addition to his tax preparation and planning work.
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