build back better...than what???





11/2/21



Currently there are three major proposed tax law changes that we are concerned with.





Fact: The first of these proposals would extend the IRS reach into your banking records. For the last 30+ years, the IRS and various federal agencies are notified if you make a cash or wire transaction of $10,000 or more. This was originally put into law in the 80’s, under the auspices of “Fighting the Drug War”. It’s up to debate how much this has actually done to help.


A new proposal by the Biden administration would give the IRS the ability to see any banking transactions that totaled more than $10,000. The original proposal was $600, but this new figure does nothing to change the base problem with this legislation, which is the IRS will be able to see every penny you put in and take out of every account you hold. The baseline $10,000 figure only means they have to wait until a total of that amount has flowed through your account, any account. Then they can have all the records from there.


Opinion: What no-one has explained is how this will be reported to the IRS, and more importantly, how you will be forced to justify each and every transaction. As the bill is currently proposed, the IRS can identify any transaction as a capital gain or business income, which they could tax you on, and it would be up to you to prove that it wasn’t. With most tax laws that congress passes, the burden of making them work on paper falls to the IRS and the burden of proof, one way or another always falls on the taxpayer. Most banking institutions are against this bill as they know it will cause massive account closures costing them billions due to the federal intrusion and the new exorbitant fees they will have to charge to pay for the new reporting requirements.


Fact: The next in this list of proposals by the Democrats is new tax on the ultra wealthy, and while it begins with a new additional tax on incomes of $10 million or more, according to an article by the non-profit Tax Foundation of America, it also increases the tax base in America causing an increased tax burden on all incomes of $400,000 for single and $500,000 for married. Current tax law which will go into effect in 2026, will increase the top federal tax rate from 37% to 39.6%, making the top marginal tax rate 51.4%, but this new proposal would increase the marginal top tax rate to as much as 66.2% for taxpayers in New York. Even states that forego income tax could see taxpayers with a top marginal rate of as much as 51.2%. These changes would move the US to the highest marginal tax rate in the world from our current place at 23rd.


Opinion: This is more “Tax the Rich”, but as always, the burden ultimately falls on the working class.


Fact: Last on the list of new tax ideas is the “tax on the possibility of income”, again going after the rich. According to U.S. Treasury Secretary Janet Yellen, an unrealized capital gains tax, “Billionaire Income Tax” is being written by Senate Finance Committee Chairman Ron Wyden (Democrat from Oregon), with input from the U.S. Treasury Department and the White House.


The new unrealized capital gains tax would levy annual taxes on assets while they still have not been sold, such as stocks, bonds, real estate, and art. At this point, the tax would apply only to people who make more than US$ 100 million a year for three years in a row or if one makes US$ 1 billion in annual income. The people impacted by the tax would supposedly be able to take a deduction if their assets plunge in value. Yellen on the CNN T.V. show called State of the Union today said, “It’s not a wealth tax, but a tax on unrealized capital gains of exceptionally wealthy individuals.”


Opinion: In our experience, taxes on the rich typically start with so called good intentions, but eventually come down to affect the middle and working classes. The democrats don’t explain how the value increases would be determined and how a taxpayer could either claim a loss or then prove it. Most tax analysts see this as unconstitutional, which means if passed, it will be challenged in court as will the banking intrusion bill.


Summary: Tax the Rich, always translates to bilk the working class. In addition, what seems to escape these geniuses in the government is that this type legislation will cause massive offloading of US based income and investment, and create a massive black market economy that evades all taxes. History has proven this, time and time again. These changes would further hurt an already shaky economy and possibly topple the currently teetering stock and housing markets.