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Deciphering Biden’s real tax plan a bit of a zoo

Jim HamillIn September 1948 the Boston Braves baseball club was fighting for the National League pennant.

These fights, baseball types know, require planning, tactics and strategy.

The Braves had the legendary pitcher Warren Spahn in their rotation. They added to that the major league leader in complete games and victories, Johnny Sain.

Gerald Hern, sportswriter for the Boston Post, summed up the Braves pennant-drive strategy.

First we’ll use Spahn, then we’ll use Sain, then an off day, followed by rain. Back will come Spahn, followed by Sain, and followed, we hope, by two days of rain.

The Braves won the pennant.

Sometimes, it seems, the simple plan can actually work.

Presidential candidates, in their typical fashion, include tax plans in their blueprints for a successful presidency. Joe Biden did so. The Biden plan was analyzed upon issuance by commentators and think tankers of varied political stripes.

The Biden victory raised the attention level from a lightbulb to a spotlight. Year-end tax conferences attended by tax advisers included discussions of “what Biden will do.”

Mr. Language Person tells me that “will” can mean “expressing inevitable events,” but can also mean a “desire” or a “wish.” So is the Biden plan “inevitable” or merely a “desire?”

I’m not convinced it is either. When you go to the zoo, any zoo that is, there are certain things you can expect to see. Elephants, giraffes, zebras, hippos, tigers, reptiles, birds. In Albuquerque, penguins also. In Memphis, pandas.

So, too, do all tax plans advanced by candidates for president include certain items. And each candidate has their own special item thrown in. But when we go to the zoo, it is often one creature that catches our attention and becomes the post-event topic of discussion.

My problem with the endless chatter about the Biden tax plan is that most of it will never come to pass. Most of it was never, I believe, intended to come to pass.

The trick is discovering what piques the candidate’s interest. Don’t discuss the way that penguins camouflage themselves with countershading when your child just wants to know why the tigers don’t live with friends like Daniel Tiger does.

Of the animals in the standard tax plan, each candidate has a favorite. He’ll walk by the others, which are simply mandatory figures in “a plan.” Like zoo patrons, politicians have their favorite tax critter.

Walt Disney, an expert on children and hence politicians, said “the way to keep children out of trouble is to keep them interested in things.” What will come of the Biden plan depends on what will keep the children in government interested. It will assuredly not be everything in the candidate’s plan.

I believe the right approach to the inevitability of the Biden proposals is to keep things simple, much like the Braves plan for pennant success. What keeps the children interested?

Some children matter more than others. U.S. Sen. Ron Wyden, chair of the tax-writing Ways and Means Committee is one. He has some interesting views not in the Biden plan.

My advice in distinguishing inevitable from desire? Spahn-Sain-rain. Stay simple. What is the fundamental view of Mr. Biden, and perhaps also Mr. Wyden? Maybe also Treasury Secretary Janet Yellen.

I’m going to go with income and wealth inequality. Post-election, pre-inaugural, Mr. Biden forcefully spoke of the top of the wealth pyramid actually gaining wealth in the pandemic while many, many others suffered, often greatly.

Look to tax proposals that will address the issue of income and wealth inequality. It’s what keeps the children interested.

Capital gains rates, on the table. Income from labor is taxed at a higher rate than income from investment capital. This has been viewed as an inequality issue and is likely to be a favorite animal of the president.

A lower threshold to trigger the estate tax. Perhaps elimination of the so-called “step up” in tax basis at death. Wyden favors taxing annual gains in investments. It would be easier to settle up at death or when the heirs sell accumulated investments.

The 20% individual business deduction and the 21% corporate rate may also be more inevitable than desire. No one can promise what is inevitable, other than it being another interesting year.

James R. Hamill is the Director of Tax Practice at Reynolds, Hix & Co. in Albuquerque. He can be reached at jimhamill@rhcocpa.com.

 

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