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Illustration: Eniola Odetunde/Axios

High-net-worth Americans are busy setting up trust funds, giving large gifts to heirs and philanthropies, and even selling family businesses as they brace for the tax hikes a Biden presidency might bring.

Why it matters: President Trump has jacked up the amount that people can leave tax-free to their heirs to record highs. If Biden wins, his tax shakeup would have ripple effects on how the wealthy buy and sell properties, allocate savings and investments, and give to charity.

Driving the news: Biden says he wants to raise taxes on people who earn more than $400,000 a year — which excludes most Americans — and lower the amounts people can give tax-free to their spouses and heirs.

  • He also wants to tax capital gains and dividends at 39.6% for people making over $1 million (which would be bad for private equity investors and others).
  • The goal is to raise revenue for federal coffers while targeting a segment of society that can best afford it (and for whom few people feel sorry).

"Most of our clients would be would be impacted by the Biden tax policy in a negative way," says Ryan L. Losi, executive vice president of the Richmond-based accountancy PIASCIK, whose practice includes professional athletes, real estate investors and business owners.

  • Biden's tax proposals, with analysis of their effects by the Tax Foundation (which is often described as tilting conservative), can be found here.
  • The structure of any new tax laws could determine if wealthy investors dump stocks for bonds, or if business owners take less money out of their firms as "compensation" and more as "distributions."

How it works: Biden proposes to cut in half the unusually generous cap of about $23 million that a couple can leave to heirs tax-free. This means gift and estate taxes, which can climb to 40%, would kick in at much lower dollar amounts.

  • "People are making extraordinary gifts before the end of the year, getting those amounts out of their estate," says Joe Maier, an estate and succession planning attorney at the Johnson Financial Group in Racine, Wisconsin.
  • If Biden wins, tax professionals expect an even greater stampede of customers who want to make gifts, set up trusts, and establish philanthropic vehicles called donor-advised funds (DAFs) — all before Dec. 31.

Family business owners who have been flirting with selling their companies are making a big rush to the exits, since it takes months to close such a deal — and waiting until next year could mean paying 40% in taxes on the transaction vs. 20% this year, Maier tells Axios.

  • "For a lot of clients, it's a once in a lifetime event," Maier says. "So there's huge urgency right now to even take a lower purchase price."
  • Buyers are lowballing their bids — knowing that a seller could be grateful for a 10% smaller offer as long as the deal closes in 2020.

Yes, but: "Just 1.9 percent of taxpayers would see a direct tax hike" if Biden’s tax proposals for individuals were in effect in 2022, according to the Institute on Taxation and Economic Policy (ITEP).

  • West Virginia would see the fewest taxpayers affected (0.6%), and Connecticut would see the highest (3.7 percent).
  • Many of Biden's proposals would simply attempt to roll tax laws back to where they were when Barack Obama left office.

Individuals aside, Biden wants to raise tax rates on corporations to 28% from 21%.

The bottom line: Biden has said that tax law change is a priority, but nobody knows how soon he would tackle it or what any new laws might ultimately say.

  • If Biden tries to pass expensive bills in 2021 — like on infrastructure or climate change — he'll have an immediate need "to raise revenue to pay for the associated spending," Rohit Kumar, co-leader of the Washington national tax services practice at PwC U.S., tells Axios.

Go deeper

Ben Geman, author of Generate
Jan 20, 2021 - Energy & Environment

Voters favor Biden's climate policies, but few view issue as top priority

Data: Morning Consult; Chart: Axios Visuals

Several new polls help to show where the public's at on energy and climate as Biden takes office.

Why it matters: People tend to favor emissions-cutting and low-carbon energy initiatives, but it's hardly top of mind.

First look: Senators propose bill to ban corporate PACs

Sens. Jon Ossoff and Mark Kelly. Photos: Chip Somodevilla (left), Courtney Pedroza/Getty Images

Sens. Mark Kelly (D-Ariz.) and Jon Ossoff (D-Ga.) will soon propose a bill prohibiting for-profit corporations from establishing and managing political action committees, according to a copy of the legislation obtained by Axios.

Why it matters: The introduction of "The Ban Corporate PACs Act" comes amid heightened scrutiny on Capitol Hill regarding money in politics, including efforts to bar companies from influencing political campaigns and federal elections. It would likely face a court challenge and First Amendment concerns.

Exclusive: YouTube shuts down two Oath Keepers channels

Stewart Rhodes, founder of Oath Keepers. (Photo: Aaron C. Davis/The Washington Post via Getty Images)

YouTube has deactivated two channels linked to the Oath Keepers militia group whose members have been charged in relation to the January 6 Capitol riot, the company told Axios.

The big picture: Social media platforms that were used to plan or promote the Capitol attack have moved with varying degrees of speed to bar the accounts involved.