2021’s Government Relief Plan and What it Means for Us
I first wish to say that my message has no Political Agenda, rather meant to share some thoughts about the Economic effect of expense of running our Government and the direction of our newly elected Political Administration.
I always have an ear to the ground when the Executive Office or Congress changes hands to see what change in Taxation are proposed and those that ultimately become Law.
President Joe Biden was elected in part by attracting voters that supported two of his specific initiatives. Two of these initiatives are Medical Insurance or all and forgiveness of student loans. Of course, young people with student debt and people without health insurance like that. It is wonderful but they cost money… a lot of money. How much money?
The Congressional Budget Office has stated that EACH of these two initiatives are conservatively estimated to cost $110 Trillion over 10 years. That would be an additional $10 trillion in addition to the $5 Trillion already collected and spend every cent each year. That is 3 times the dollars currently needed to run the country. That amount goes up another $10 trillion if both initiatives are enacted into Law.
This week, an additional $1.9 Trillion has been added for COVID relief. Where will this money come from? Either Tax increases or print more money, the latter of which stimulates unwanted inflation.
In short, the Government is looking for HUNDREDS of TRILLIONS of new Tax Revenue Dollars.
I recently asked SIRI how many years just ONE TRILLION SECONDS on the clock would be. Her answer was 31,688.74 years. The last Ice age ended about 10,000 years ago. For most, it is difficult to understand hundreds of trillions.
To raise the those amounts of Tax revenue, President Biden stated in his Campaign that the Capital Gains Tax rate needs to be that of regular income Tax rates. That is around 2 times the current rates. He also declared that he is seeking the elimination of the “Step up in cost Basis “ on appreciable assets passed from generation to generation. This is the most dangerous of both.
proposals. This area is the only source of taxable dollars exist that come close to the staggering numbers needed to move our country forward. It’s also a place where taxes can be readily collected, when something sells and the cash is in hand.
“The Step Up in Cost Basis “applies to investment assets passed on at death and then sold by the heirs. When someone inherits and subsequently sells a capital asset such as stocks, mutual funds, bonds, real estate, collectables, Art, Jewel’s ect., the tax rate is applied to the difference between the sale price minus the then market value of the property. This then becomes what is known as the “Capital Gain.”
Removing the “Step up in Basis” means the Tax calculation on the Gain would then be the difference between what the deceased original paid for the investment and the actual value as of the date of Death.
Example – Father bought Tesla Stock at $10 a share and is valued and sold for $200 per share at his death.
Old Law – For Heirs, valuation for tax purposes would be $200 (Date of Death Value) and if sold for $200 there would be no gain, thus no tax. (Loophole)
Proposed Law – For Heirs, tax basis would be Father’s cost or $10 leaving a $190 gain per share and taxed on that amount.
Since 1914, the Estate Tax or “Death Tax” as its dubbed was designed to make up for this gaping hole in our tax system. But the distaste and effect a “Death Tax” has promoted its repeal and now Capital Gains, which has way more Tax Revenue is the target.
Regardless of who leads from our Governmental Branches, the Capital Gains is a Loophole in our tax code that will be changed to answer some of the question of “how do we pay for all this.”
Let me show you why and how your Life Insurance will pay what must be paid and keep your Family and Heirs protected from this little-known changes that are coming.
Thank you for listening,
Joe