Recently, the most popular presidential candidates and other prominent Democrats have suggested a number of different tax policy proposals for the 2020 Presidential election.
In 2015, Ernst & Young, LLP released a macro-economic study on the impact of repealing or limiting 1031 exchanges that quantified that the US economy would actually contract if §1031 was repealed or limited, finding that GDP would be reduced by $8.1 billion or more per year. So far only Cory Booker, who is a “minor” Presidential hopeful in 2020 Presidential Election, has advocated for repealing the Starker 1031 Exchange.
Eliminating the option of structuring transactions as like-kind 1031 exchanges would not only cause a sharp drop in real estate transactions, but the additional business and services generated from the transactional activity related to §1031 exchanges would fall as well.
Out of all the Democrats running for president (2020 Presidential Election), Elizabeth Warren has arguably had the most to say about taxes as a candidate. She has proposed the Ultra-Millionaire Tax (also known as the “wealth tax”). The annual tax would be equal to 2% on net worth above $50 million and 6% (3% before the senator’s Medicare-for-All plan) on net worth above $1 billion. A taxpayer’s “net worth” would consist of all assets worldwide, including residences, businesses, trusts, retirement funds and personal property worth $50,000 or more. Assets held by minor children would be counted, too. A few other aspects of the plan include:
- Minimum audit rates for taxpayers subject to the tax;
- Deferred tax payments for up to five years for wealthy taxpayers with liquidity issues; and
- Sen. Warren is pushing for a 7% tax on all corporate profits reported to investors above $100 million. There would also be no exemptions or deductions for the new tax.
Vice President Biden has issued a climate change plan that includes some tax provisions, too. His “Clean Energy Revolution” would be paid for by “reversing the excesses of the Trump tax cuts for corporations”. Major tax proposals coming out of the Biden camp include:
- Repealing Trump administration tax cuts for corporations and the wealthy, including raising the highest personal income rate back up to 39.6% and the corporate income tax (Democratic Party Tax) rate to 28%;
- Imposing a 15% minimum tax on large corporations;
- Capping itemized deductions for the wealthiest Americans at 28%;
- Eliminating the step-up in basis for inherited capital assets, which means more taxes on heirs;
- Ending favorable tax rates on capital gains for anyone making over $1 million;
Bernie Sanders has proposed to increase the individual marginal income tax rate. Sanders also proposes to cap itemized deductions at 28% for households making over $250,000, and to repeal the 20% “pass-through deduction”. The Sanders proposal imposes a wealth tax of between 1% and 8% on individuals with a net worth of at least $16 million for single individuals or $32 million for married filers
Sanders proposes to restore the corporate tax rate to 35%, treat large master-limited and other partnerships as corporations for tax purposes, eliminate expensing and accelerated depreciation. Sanders would also limit the interest deductions of corporations to 20% of adjusted taxable income, and tighten the related party rules. Finally, Sanders would require corporations with revenues over $25 million to publicly disclose significant portions of their democratic party Tax returns and country-by-country financial information. In addition, the existing flat 40% estate tax rate would be replaced with progressive rates.
Former New York City Michael Bloomberg does not support the type of “wealth taxes” proposed by Sens. Warren and Sanders. Nevertheless, he has indicated that he supports increased taxes (Democratic Party Tax) on the wealthy—we just don’t know which taxes and by how much. He is also taking aim at the child tax credit. The mayor has called for increasing the credit, making it fully refundable, and phasing it in faster.
Pete Buttigieg has hinted at a few tax increases that he would consider as president, including:
- Eliminating unspecified corporate tax breaks;
- Lowering the estate tax exemption amount back down to pre-2010 levels;
- Higher personal income tax rates for the top brackets;
- A “wealth tax” on the richest Americans;
- A 35% corporate income tax rate (i.e., repealing the recent reduction to 21%) to pay for his “Medicare for all who want it” plan.
