July 2, 2021
Each new administration brings unique challenges and opportunities to the business world — and President Biden is no different. In an effort to secure funding for family-oriented programs, he has proposed significant changes to how taxes function in the United States.
Many business leaders struggle to understand what, exactly, the new tax plan will entail. To help, we've outlined the basics below:
Corporate Tax Rate
How much, exactly, the corporate tax rate will increase under President Biden is up for debate. While it's unlikely that this will return to previous levels, 28 percent has been proposed. Experts anticipate an increase from the current 21 percent to 25 percent, pending negotiations. Still, combined with state taxes, this would spell a significant increase in the effective tax rate for many businesses.
High-Earning Individual Taxes
At first glance, proposed changes to the tax rate for the nation's highest earners may not seem to impact businesses to a large degree. Some, however, may be affected on the basis of their status as unincorporated pass-through entities. This makes it possible to avoid corporate taxes by reporting business income via personal taxes.
Global Intangible Low-Taxed Income
In addition to a general corporate tax hike, businesses may face increases on foreign income taxes. Under a plan proposed by Democrats, the Global Intangible Low-Taxed Income would be adjusted to tax all foreign earnings. The goal: limit the incentive to move operations offshore.
As you navigate upcoming tax changes, look to Davidson Fink LLP for guidance. Contact us to learn about our business law services.