Which US States Are Likely To Witness Change In Taxation Policy After Presidential Election Results And What?
The United States of America has one of the most complex taxation systems in the world. With the imposition of federal, state, and local taxes on US citizens, it becomes imperative for them to be vigilant and be watchful of the taxation clauses. The US presidential election of 2020 is being viewed as a historic event in the taxation regime of the country. The incumbent President, Donald Trump held quite a liberal approach towards tax collection from its citizens. On the contrary, the newly elected President, Joe Biden is expected to adopt a more rigid approach to keep the US treasury’s fund collection to a new high, once he receives the throne from Donald Trump in January 2021.
Key Taxation Changes Expected After Presidential Election Results
- With the election of Joe Biden from the Democratic party, the new tax regime is likely to undergo some of the most radical changes. Both the state and federal taxes will bear the brunt of Biden’s proposed taxation policy, which is as discussed below-
- Biden has declared to repeal the 2017 Tax Cuts and Jobs Act (TCJA), which was implemented by Trump. Consequently, tax on wages, interest, and business income will rise from 37% to 39.6% across all 50 states in the USA.
- For employees earning more than $400,000, there will be an additional 12.4% Social Security tax apart from the 12.4% Social Security tax on the earning of the first $137,700 which is split evenly between the employer and employee.
- The democratic administration is expected to levy higher taxes on the high-income group across all the states. It is likely that a cap of 28% will be placed on the itemized deductions on incomes greater than $400,000.
- The 20% Qualified Business Income (QBI) deduction for incomes over $400,000 is most likely to be repealed.
- Joe Biden’s taxation plans do not intend to repeal the state and local tax (SALT) deduction cap. This is as per the political suitability of the Democrats in The United States. Consequently, the marginal state and local rates are expected to cross the 60% boundary for states like California, New Jersey, New York, Hawaii, and New York City.
- Trump had reduced the corporate income tax rate from 35% to 21% during his regime. However, Biden will raise the tax to 28% in an attempt to make the corporations more liable towards the US economic growth.
Tax rates across all the states in the United States will surge in the coming year. It is evident that Biden’s administration will make the US economy heavily dependent upon the tax collection, which is likely to affect the growth of business enterprises. Hence, The Accounting And Tax Company offers robust services to keep the accounts updated and free from any discrepancy because of non-compliance with respect to the taxation system. It offers smart solutions to accrue maximum tax benefits on account of deductions offered by the US government.
