Prepare for Higher Taxes Ahead
When Curtis Carpenter, an investment banker and senior managing director with Hovde Group, met with a bank’s board of directors recently to explore the possibility of selling, they had a curious question. What’s the potential tax impact for shareholders of a sale in 2021, versus further down the road?
Higher taxes in the future appear to be increasingly inevitable. As the nation moves beyond the implications of Congress’ $1.9 trillion stimulus bill, expect more discussions around how to pay for it. Bloomberg News reported this week that President Joe Biden’s administration is eyeing the first major tax increase in decades. Biden campaigned, in part, on a platform that included raising the top personal income tax rate and capital gains taxes for the wealthy.
High-income earners often sit on the boards of banks and this may impact their decisions about when to sell. Plus, Biden proposed raising the corporate tax rate from the current level of 21% to 28%. The corporate tax rate was 35% prior to President Donald Trump’s tax cuts.
The country is at a historical moment. Democrats control the U.S. Senate and House of Representatives. Tax rates are probably the lowest level that any of us will see in our lifetimes. The federal deficit has ballooned in the last two decades, under both Republican and Democratic administrations. This can’t hold.
