Tax Institute Examines Impact of Biden’s Tax Proposals

Joe Biden

Taxation is front and center in this year’s election, a lot more front and center than the electorate realizes. Having the right information is critical, and not having it is dangerous.

The American people will once again choose who they wish to lead them for the next 4 years, who they want to lead the House for the next 2 years, and who is to fill the seats in the third of the Senate seats that come up for renewal biannually. There is always quite a bit at stake, but perhaps nothing like we’re about to see, due to how polarized the issues are this year, to the extreme.

Democracy places this responsibility in the hands of the people, where the overall understanding of all of the complex issues facing the country gets decided completely off the cuff, by those whose understanding of the issues are at best superficial, and may not even be accounted for at all, and can and often does come down to things like how likable candidates are.

Among the two candidates for president, Donald Trump can probably be considered the most unlikable presidential candidate of all time, versus Joe Biden who those who choose to favor Republicans may widely mock but is certainly less contentious. Political correctness matters to us generally, and it especially matters with political matters itself, which gave birth to the term and is based on trying to upset the least number of people which trumps what may be right.

Setting aside your beliefs of the right way to proceed in order to appear to be more likable to the public is not in Donald Trump’s nature though, which is not only very refreshing but is the only sensible way to conduct yourself as a leader, although it is still wise to look to strike some sort of balance between telling the people the truth and perhaps doing so in a gentler way than President Trump tends to favor.

There is no question in anyone but Trump’s mind that he could help himself if he could become at least a bit more politically correct, as odious as this is generally. There is a right balance with everything though, even political correctness, which can make the truth more palatable, put a better spin on it, rather than serving to alienate and therefore fail to achieve its purpose of better informing.

The danger of doing too much of this is that this can pander to people’s ignorance, displacing the truth with something else, playing on people’s emotions and seeing reason subverted.

In the popularity contests that ensue, the fate of our country can come down to which candidate is more likeable, which is exactly how this presidential election is playing out, where we are happy enough to just go with that and not think very much, if at all, about what we are actually buying with our vote, what’s inside the bag that is flailing around in it which will be unleashed after we put someone in power.

There is perhaps no issue as divisive between the candidates as how they approach taxation, where President Trump wishes to give the economy more room to breathe and prosper, where Biden and his associates promise to raise taxes through a number of means and try to put the country’s economy in a choke hold and cut off a lot of its blood supply.

This characterization is not how the average American understands the issue, which is not driven by partisanship but instead by economic realities, realities that we cannot avoid however we choose. Trump just doesn’t give the economy mere lip service, he is genuinely interested in its welfare, far more than Biden is, although you do need to understand a little about how the economics plays out to get this. People just don’t, and that’s dangerous.

Understanding how approaches to taxation affect an economy requires that we actually look at its effects upon the country itself, but this is far from the standard that drives these decisions. People’s sphere of interest is generally limited to how these things affect them personally, where they may dislike taxation but as long as the tax man doesn’t harm them too much, they don’t care a whole lot about what he does to others, and they may even revel in the fact that others who have more are paying more, not understanding that these things are all connected.

It’s fine that people will decide things based upon their own interest, and economists would even call that rational, but in order to even be in a position to do so, we need to be aware of what the implications of a given tax plan will actually be upon us, and upon the country in turn as we look at the impact of it collectively.

This is where the big hole is with this issue, and while they still may care to vote against Trump due to issues they may have with his personality, we at least need to be aware of the price we may pay to vote for a guy we find more likable and not ending up liking the aftermath anywhere as much.

Both men profess to wish to act in the interest of the country, where Trump wants to make America great again, and Biden intends to build back better. Where the two men really differ is with their approaches to taxation, and we need to figure out which plan actually makes things great or better and which may make things worse, and perhaps a lot worse.

Perhaps nothing shows the contrast between the two candidates on the issue of taxation than where they stand on capital gains tax breaks. Biden wants to do away with it altogether, both the lower rate that people pay on what they earn from stock investments and other income based upon capital gains, the selling of assets that have increased in value over time.

This is one of the bombs placed directly under Wall Street that we have been speaking about, designed to target investors, and like his other policies, everyday Americans will be punished for this by having to cough up a lot more of their retirement savings to Uncle Sam, or rather, Uncle Joe. The damage that this will cause goes much deeper than this because this in itself will cause a bear to appear that won’t go away until Uncle Joe gets voted out, dies, or becomes incapacitated, where we not only have to cough up a lot bigger chunk of it, the chunk will shrink as well as a result of just this one move.

A Biden Victory Will Be Painful for All

Either of these latter two scenarios, Biden dying or no longer able to perform the role, which he is at least very close to already if not already there, will turn the reins over to Kamala Harris, who makes Biden look like a lightweight on these issues and who will surely make the tax burden and the attack on Americans to worsen, but that’s assuming that Biden will have any say in things if he becomes President apart from reading the scripts that are given to him.

Biden even needed a script when he did a video call informing Harris that she got the job, and seems to need a script for even the most casual of conversations. Biden is about to be not the world’s most powerful person, but the world’s most powerful puppet, and those who are writing his scripts will have the real power, with Harris now being added to the gang of radicals pulling his strings and programming his vocalizations.

President Trump, on the other hand, is now looking to do what he can to lighten the present burden of capital gains taxes by way of an executive order that will factor in inflation into the gains. This makes perfect sense as if you invest and only earn the rate of inflation, you have made nothing on a net basis, and it is unfair to tax people on what is essentially fictious gains.

We need to do a lot more of this to promote fairness. Income taxes are indexed to inflation but other income is not but it should be. This applies to both dividend and interest income, where if you only get back the rate of inflation with bonds or get even less than that with a savings account, you are just breaking even with the bonds and ending up with less money with savings and there isn’t any additional real income to even tax. They do it anyway though, and Biden wants more of it.

Biden has a lot more taxes in store for us than this, and the problem is that hardly anyone has any idea of what this all will lead to. We have told you all along that this will cause the economy to shrink and cause real pain for everyone from those on the bottom to the top, but other than some very vague references to this in some Trump commercials, we don’t see this mentioned much, and sadly, even Biden and his crew probably do not have much of a clue of what they are doing.

Someone needs to look at this though, the preview of the economic consequences of a Biden presidency, and we only have to look at his taxation plans to get a sense of what we are facing. The real damage will come from his party’s spending policies, taking us from a very dire looking fiscal situation to just blowing things up, where in 4 years he and his gang may overspend more than we have since the country was founded.

This is damage that can never be repaired and something that will take us a lot closer to economic doomsday, where the U.S. government can borrow no more because they have tapped out sources and will then just collapse, with the country collapsing right with it. This is a future that will be greatly accelerated with a Biden presidency, but we won’t see it unless we look, and after the fact is too late.

There are economists who work these things out behind the scenes, even if hardly anyone cares to listen, and these aren’t things that are going to be getting any real coverage with media outlets that are so four-square in favor of the radical socialism that the Democratic party has adopted.

Thankfully, we have the Tax Foundation to rely upon, who have crunched the numbers and worked out how Biden’s tax reforms alone. Biden’s plan has been determined to reduce U.S. GDP by “1.51% over the long term.” Given that our GDP growth was barely above that before the 2020 economic crisis, and it will take several years to just get back to where we were, this is a prescription for a recession-like economy for as long as these changes are allowed to stand.

This is what taxes do, and if the economy is running too hot, taxes are the most effective way by far to cool it down, but are just as effective in taking us to barely in the green to being in real trouble.

This number won’t really be meaningful to the average voter who know very little to nothing about macroeconomics, but to those who know what this means, this in itself is very disturbing. This does produce some other changes that everyone can understand, an issue near and dear to the hearts of Americans, and that is how many jobs will be lost when you contract the economy this much.

Everyone gets their pay cut under this scheme from income tax hikes, ranging from a loss of 7.8% for the top 1% of earners to 0.6% for the lowest earners, and many will think that a percentage or so less income won’t matter that much, a lot of these people are barely getting by now and even a percentage less will be felt.

Raising Corporate Taxes Is a Great Idea if You Want to Lose Many Jobs

This is not the worst of it though. This does not even account for the 7% loss of buying power that Biden’s planned corporate tax rate will cause, and this will smack everyone with this 7% loss as it puts the price of everything up by that much. Even people on welfare will be punished by this because their meager spending still comes from things produced by companies who will have to put the cost of their goods and services up by this much to account for Uncle Joe’s additional cut.

This is 10 times more of a burden than the average of 0.6% that the lowest quartile of workers will have to pay in tax, which only addresses direct taxes and not indirect taxes like this corporate tax hike. The Tax Institute does good work but they missed this effect completely in their calculations, and they are supposed to be the experts on this stuff, which shows just how buried the idea is below the surface. There will be no mistaking this monster when it rises from the ground and marches toward us with an open hand demanding our money and the full force of the law to ensure we pay this and do without whatever we need to in order to make Uncle Joe and his band of tax pirates happy.

There’s another number that the Tax Institute has calculated that people will really be able to understand, which is the net loss of 585,000 American jobs that higher direct taxes will produce. Once again, this is almost certainly understated as the corporate tax hike itself will add a lot more to this, just like putting down the tax has created so many more jobs.

This has been Trump’s claim to fame, what he is most proud of, and all he did to bring the employment numbers up to the best in the history of the country was to cut corporate taxes. Putting them up will have the opposite effect as sure as the sun rises, and it’s actually very easy to understand how this plays out.

This 7% price hike on everything will cause people to be able to buy less, this much less in fact, and this means that companies will sell less and therefore need less people to produce what they produce. All the people that get laid off, including the 585,000 that get laid off from the contractory effects of other tax increases, now have less to spend because they are out of work, further contracting demand and requiring even more layoffs due to the decreased production that results.

We can see the effects of tinkering with corporate tax rates just by looking at how the consumer price index has moved during Trump’s presidency. In the first 2 years, the CPI rose by an average of $5 per year. After the tax cuts, this dropped to just $3 a year, and this is independent of recent events. We want this to keep going up but less is better as this means it will cost even more to buy the things that we need on a given level of income. We buy less, we get less, we produce less, and we end up with less income in the aggregate and less prosperity.

Hardly anyone seems to care about these effects, as they aren’t even being shown them, and instead what we get is the Uncle Joe show, together with his new sidekick Ms. Harris, as well as the rest of his posse who are on a mission to severely punish us economically, in addition to everything else that they have declared war on, our way of life, capitalism, our maintaining a reasonable amount of law and order, our economic prosperity, and even the American Constitution itself.

They say that the people always get the government they deserve, and anyone who votes for Biden may deserve to suffer for exercising their choice so frivolously, for allowing their dislike for the current guy to have them pick anyone else, without actually looking at what will happen if their choice actually wins. The problem is that we all suffer when these people use their votes so unwisely, perhaps like kindergarten children might vote for the most pleasant clown. The clown won’t run their school though, but Uncle Joe will run ours, based upon what ends up being a kindergarten level of examination.

The country deserves better, but seems to be in store for a real hard lesson over the next 4 years if Biden does actually win, and produce widespread frowning intense enough that even CNN and MSNBC can’t even paint a smile on. Who knows though, perhaps they will somehow portray the suffering on Trump, and all those millions that have lost their jobs thanks to Biden will think that Trump’s efforts to create jobs somehow caused all this new unemployment that we will see if he is given the opportunity to rule over us.

We wouldn’t put this past them given that they are blaming Trump for the current recession even though no one fought harder to prevent it than he did, and even go as far as to say that his views on COVID strategies is what has caused this recession. That’s the far end of ludicrous, as he fought as hard as he reasonably could against the restrictions that caused all this pain and was widely criticized by the fake media for doing far too much. With Biden in the White House, they’ll see what real harm a president can do.

If this was all we have to worry about, the impact of higher taxes that Biden is drooling over, this would be painful but bearable, but when you throw in all the other things that his troupe of jesters are yearning for, all the crazy ideas of Sanders and Warren that we could never implement without blowing up the country’s economy, such as Medicare for All and a wealth tax, sending the U.S. Treasury into a death spiral, are weapons that are even more dangerous and aren’t just subject to repeal and repair.

The Tax Institute and others are like the Paul Revere of today, warning us that the British are coming, but this time, no one seems to notice him or to even care. The odds are well in favor of the enemy with this revolutionary battle, where the country becomes defeated by its own hand and we all lose.

Monica

Editor, MarketReview.com

Monica uses a balanced approach to investment analysis, ensuring that we looking at the right things and not confined to a single and limiting theory which can lead us astray.

Contact Monica: [email protected]

Topics of interest: News & updates from the Office of the Comptroller of the Currency, Forex, Bullion, Taxation & more.