Displaying items by tag: biden

(Washington)

Biden’s big ‘death tax’ has been spooking advisors and their wealthy clients for months now, and there are very major concerns over if and when it will be implemented. Well we have good news and bad news today. The good news is that both the House Democrats and the Ways and Means commission have put forth proposals with significantly lower tax rates than Biden’s initial budget. The House Democrats, for instance, would keep all-in capital gains taxes at a max of around 28.8% (counting the surtax). The bad news is that a recent adoption by the Ways and Means Commission puts the cutoff date for any company sales that would be affected by Biden’s much bigger capital gains taxes as Sept 13th (for sales with a binding contract prior to that date).

FINSUM: Overall, the direction of the proposals is getting more favorable for the HNW community, but there is still a LONG way to go.

President Joe Biden is expected to nominate Professor Saule Omarova for the office of the Comptroller of the Currency, one of the leadership positions in banking oversight and regulation. Omarova is currently teaching at Cornell University Law School and is a critic of the role fintech is playing in the current financial system, all the way from cryptocurrency to robo-advising. Additionally, she believes regulation should be tightened across the board in banking, calling for a larger role in government supervision. She has also advocated for restructuring the Fed and having them provide consumer bank accounts. This is only the beginning of the journey as both fintech and the banking sector will lobby hard to make sure she doesn’t get confirmed for her position.

FINSUM: This would be a drastic leadership change in regulation compared to the relatively hands-off approach fintech has benefited from so far. The suggested changes to the Fed would pump shockwaves through the financial system.

(Washington)

Congressional Democrats are pushing for more ways to increase taxes on wealthy Americans, and their newest mechanism is closing a loophole on Roth IRA contributions. Currently, people making in excess of $400,000 can convert pre-tax retirement saving accounts into a Roth IRA. Technically, individuals can’t contribute to their Roth if their income exceeded $140,000, but the ‘backdoor’ loophole allowed you to convert the pre-tax contributions into a Roth IRA. Additionally, House Democrats are trying to end the ‘mega backdoor’ Roth’s which were saving up to $38,500 for wealthy individuals. The Democratic proposal also is requiring minimum reporting for certain balances and further Roth restrictions. These are significant changes to the potential tax code for the wealthiest, and if implemented these provisions would all come into effect Dec. 31, 2021.

FINSUM: Democrats are also considering automatic enrollment in Roth retirement vehicles in order to boost retirement savings on the lower-income spectrum. These are some of the largest changes to the tax code in recent years, all in an attempt to boost the tax base and pay for a $3.5 spending bill.

(Washington)

Rollovers are about to see a huge change. Advisors have largely been sleeping on the effects of the new fiduciary rule, largely because the current one was drafted under Trump and is thus milder. However, what many don’t realize is that come December, rollovers are going to be a lot more complicated. According to Fred Reish, leading industry attorney, the new rule “has turned the rollover world on its head”. Speaking further and addressing compliance, he added “A whole series of steps have to be taken to adjust to this standard”.

FINSUM: Okay so here is the reality. Full implementation begins in December, but the DOL may grant a last-minute stay because it is working on a full new fiduciary rule draft (Biden’s version). In either event, the new rule will certainly not be lighter than this version.

(Washington)

Advisors and their clients have spent much of this year worrying about Biden’s tax plans. Two of Biden’s budgetary priorities to raise tax revenue fall squarely on the wealthy: nearly doubling capital gains taxes and the elimination of the step-up in basis in inheritance. Well, speaking on condition of anonymity, according to Bloomberg, Washington insiders are saying the elimination of step-up in basis (often panned as a “death tax” by critics) seems be heavily watered down, or maybe dead altogether. The proposal received heavy opposition and Democrats may have already backed away from its inclusion in the budget plan, or may go with a heavily diluted proposal.

FINSUM: So there is also a big knock-on effect here as well—it means the Democrats likely won’t hike the capital gains taxes to 28% or more on the wealthy, as hiking it much without having eliminated the step-up in basis will likely end up costing the government money.