Planning for the Next President
We’re planning for the next President of the United States. Join Dean Barber and Bud Kasper as they take a deep dive into what might happen if Joe Biden wins or if Trump is re-elected.
Planning for the Next President of the United States
Dean Barber: Thanks so much for joining us on America’s Wealth Management Show. I’m your host Dean Barber, along with Bud Kasper. Okay, Bud, so this is going to be an exciting show today. We’ve been getting the question in pretty much every single client review.
Bud Kasper: Yep.
Dean Barber: What’s going to happen if Joe Biden wins the election? What’s going to happen if Donald Trump gets reelected? How do we plan for the next president? And we want to lay this out for you today, and we want to do it in a format that is not about favorites, and it’s not about politics. What we want to do is we want to talk about policy.
We want to talk about what the plans are for Donald Trump if he wins and what the plans are for Joe Biden if he wins. The important thing is: “How will a Biden victory impact me personally, or how will a Trump reelection impact me personally?”
Bud Kasper: Right.
Dean Barber: And I think that that’s what people need to be thinking about. I had a conversation just this last week with one of my clients, and she says to me, “Dean,” she said, “Can you please explain to me what Joe Biden’s policies are because I can’t… nobody is talking about what his policies are. All I hear when I turn on the news is beating up on Trump.”
Bud Kasper: Trump.
Dean Barber: Right?
Bud Kasper: Right.
What are the Candidates’ Policies?
Dean Barber: But what are Biden’s policies?” Well, I’m here to tell you that we have over a 7,000-word article written describing Joe Biden’s policies. Find those articles here:
And we’ve done the best job that we possibly can to lay out what his policies are from Social Security to taxes, to business things, all kinds of things out there. And the point is, Bud, that you have to look at that and then you have to ask the question, okay, if these policies become a reality, how does it impact the country, the economy, and down to me personally?
Bud Kasper: It’s one thing if you could vote without thinking about how it will impact your pocketbook?
One of the things I had a little fun with was the Thrilla in Manila because I wrote one of the articles.
Dean Barber: Right. I thought that was clever.
Bud Kasper: And if you think about that, that was the third fight between Muhammad Ali and Joe Frazier, which Ali won in the 14th round when Joe couldn’t go any further. But the reason I put that up is that was supposed to establish the undisputed heavyweight champion of the world. So what my parallel was to this is we’re trying to find the undisputed champion of the free world, or if you will, the president of the United States. An issue with that, of course, is how is America going to react to it? How will America respond to what these policies are, and how will it change my life?
The Thrilla in Manila
Dean Barber: Right. I think if you go back to the Thrilla in Manila, which I love the analogy there, because anybody that’s in our age group or even close to it, they’re thinking, oh yeah, I remember that. That was one of the most anticipated fights. And it was back when we had what, three channels, ABC, NBC, and CBS. And that was it. Right?
Bud Kasper: Yeah. Pay-per-view was just coming on board, and it came at the right time.
Dean Barber: Yeah. You’re right. I think that while we look at the presidential election and plan for the next president, there’s not the excitement around the presidential election like there was around the Ali Frazier fight, right?
There’s more of a question about what happens at the end of this? As Bud said, he wrote the article on what happens if Trump wins. My brother, Shane, wrote the article on what happens if Biden wins. I encourage you to get out there and take a look at those and read those in full.
Dean Barber: While you’re out there, I suggest you request a complimentary consultation. Regardless of who’s the victor, you better have a clear understanding of the economic policies and how you need to position yourself from a financial and tax standpoint moving forward.
You don’t want to wait until after it’s over. There could be opportunities in front of us days after the election, or there could be threats that will be in front of us days after the election. You need to plan for the next president. Get that complimentary consultation.
It’s very simple. Somebody will get in touch with you. We can set up a phone call to talk about what your positions are today and help you make sure that you’re in the right place whatever happens, whatever the outcome is of the upcoming election.
The Undisputed Champion
Bud Kasper: And I think the most significant part of the analogy I used in the Thrilla in Manila is the undisputed champion. Regardless of who wins the election, Dean, there’s going to be a dispute. For either way, we’ve heard that Trump won’t leave the White House. Well, I think that’s rather silly.
Dean Barber: I do too.
Bud Kasper: But we have to be prepared for that as we plan for the next president. We need to know where we’re going to stand as individuals and how this possible change in leadership will impact us or whether or not the same course that we’re on now will sustain itself moving forward.
Dean Barber: Right. So there’s one thing, Bud, that we talk about often here on America’s Wealth Management Show, and that is taxes. We’re going to lay out the nine most significant tax increases that Joe Biden is proposing so you can understand how those might impact you personally and how they might impact the economy as a whole. We know that taxes are the number one wealth-eroding factor facing all of us, especially in retirement.
Our goal isn’t to be political here. We don’t want to pick sides. What we want to do is we want to present facts of how a Biden victory might impact what you need to do from a financial perspective. And if Trump retains the presidency, what do you need to do from a financial perspective?
What’s the Impact for Individuals?
Bud Kasper: One of the things I think people are thinking hard about, Dean, though, is the same thing we’re thinking about as professional advisors. How is this going to impact us as individuals? We’re going to talk about next in these tax increases on the Biden plan, and by the way, we have the same thing on the Trump side from that perspective. The issue is: Am I going to have more money in my pocket at the end of the day or less?
Dean Barber: And: “Will my ability to improve my standard of living under a Trump presidency, or under a Biden presidency?” And one of the things that I want to get off my chest is this, Bud. Our media has seemed to make the presidential election about some sort of popularity contest, right? And it makes me want to throw up because we’re not electing somebody as president because they’re popular, we’re electing them because we agree with their views-
Bud Kasper: Policies.
Dean Barber: -or their policies, right?
Bud Kasper: Right.
The Tax Cuts and Jobs Act
Dean Barber: So before we start talking about Biden’s plans for taxes, let’s just do a quick review of what Trump did under the Tax Cuts and Jobs Act. So under the Tax Cuts and Jobs Act, Trump lowered taxes across the board for individuals and corporations. Now, some individuals, especially the single taxpayers making around the $230,000-$300,000 range, saw a slight increase in their taxes. However, the rest of America did see a tax reduction. And so people did get to have more money in their pockets. Now, many people argued, Bud, that under the Tax Cuts and Jobs Act, this wasn’t really about a tax cut for individuals. It was more about a tax cut for corporations, hence the Tax Cuts and Jobs Act.
Dean Barber: So we have to ask the question, did the tax cuts that corporate America received underneath the Tax Cuts and Jobs Act create more jobs? That’s the fundamental question, because at the end of the day if we can get full employment-
Bud Kasper: That expands the tax base.
Dean Barber: -that expands the tax base, it increases the money flow to the government. But what else does it do? It lifts everybody because they’re working, they’re productive, they’re earning money. So did it create more jobs? That’s the question.
Bud Kasper: The answer is yes, it did. It accomplished that.
Dean Barber: It accomplished that. How do we know that? Because before COVID-19, we were at the lowest unemployment rate we had seen in the United States in half a century.
Bud Kasper: In 50 years. That’s right.
Dean Barber: Yeah. So that was huge. That did work.
Bud Kasper: Don’t you even ask yourself the question that, if COVID-19 had not appeared at this time, where would we be right now?
Dean Barber: Oh, I do every day.
Bud Kasper: Yeah. You can fantasize about it if you want. I don’t know if we can pull any facts out of it, but I will tell you, if the momentum at the time was significant, it’s just hard to believe that at this point, and I’m not trying to be conspiratorial folks. Why, at this particular point in the presidential cycle, that this disease happened to come about?
Dean Barber: Yeah. And, Bud, I don’t know that anybody’s ever going to know from where did the disease come? Where did it originate? We do know that coronavirus has been around for a long, long, long time. This is the 19th strand of it. And it just so happens to be different and more deadly than ones in the past.
Bud Kasper: Okay.
Taxing Capital Gains as Ordinary Income
Dean Barber: All right. So let’s go to Biden’s tax plan. We’ve got a list of nine things here, and I want to just kind of buzz through these quickly, and we can spend some time digging into those through the rest of the show. So number one, taxing capital gains as ordinary income, right? Now, what does that mean? So today, capital gains have a favorable tax treatment. And if you’re in the 12% bracket or below, capital gains are tax-free. But under Biden’s plan, he wants to tax capital gains as ordinary income for individuals making more than one million dollars a year. The estimate is that this will increase revenue to the government of 800 billion over the next ten years.
Step-Up in Basis
Dean Barber: He also wants to increase the corporate tax rate back up to 28%. So basically, going to undo what Trump did to create the jobs. He wants to end the step-up in basis, okay, so now that’s a big one.
Bud Kasper: That is a huge one.
Dean Barber: That’s huge. Okay. So here’s what happens. You inherit money, stock, land, and a home. The cost of that property is deemed to be the value as of the date of death. So if you dispose of that property, in other words, if you liquidate the house, you sell the land, you sell the stock or whatever it is, you pay no taxes on it, right? But under this scenario, Biden wants to eliminate that. So it would go back to whatever the individual paid for it before. And then if you sold it, you would pay the taxes on whatever gain from the time the individual who passed away until you inherited the money and sold it.
The Impact on Heirs
Bud Kasper: Yeah. This is something that strikes at the beneficiaries of the family unit. And since most of us are trying to, if we can leave something to our heirs, and let’s say that you were fortunate to be in a stock that you bought at $100, and now it’s $1,000. If the person that purchased the stock sold it before they died, they’d have a capital gain to pay. However, if you are inheriting that, it’s forgiven whatever the price is on the date of the death of the person who owned it originally, that is now going to be the cost basis for the person who will inherit it, which means all that capital gain is forgiven. Is that right or wrong?
Bud Kasper: In my opinion, it’s right. It’s been in policy, and then here’s the more important thing. We use this in our planning. It would destroy some of the effectiveness of what we’re trying to do from planning. I think this is a horrible idea.
Dean Barber: Right. I totally agree. And it will impact a lot of people. And it’s not necessarily those of you with the wealth today in your 60s, 70s, or 80s. It’s your children and grandchildren that will wind up paying this tax. If we increase the tax rates, raising that top bracket back up to 39.6% and eliminating all Americans’ tax reductions across the country, they would then have to pay taxes on that capital gain at a new higher tax rate.
Bud Kasper: Right.
Double Tax on Profits Generated Oversees
Dean Barber: Yep. So we want to double the rate of tax on profits generated overseas to 21%. We want to limit the value of deductions for the wealthy to 28% of appraisal, which is included in several Obama administration budgets and imposing sanctions on countries that facilitate illegal tax avoidance and eliminating real estate tax loopholes. And then he also has the 15% minimum tax on corporations with net income over one hundred million dollars.
Bud Kasper: Which, by the way, I agree with. Here’s a situation where corporate structures in many cases with that kind of income are not paying any taxes because of the loopholes. Not illegal, the loopholes within the tax code. I think that from this perspective, they should have a tax of some sort. They’re getting the reward of their business. There should be something that comes back in the form of a tax.
Dean Barber: Right. So I think you and I can go through the list of tax proposals for Biden, and there are some of the things in there that we may say would make some sense. Then, there are some things in there, and we say, oh no, don’t do that. That would be horrific. Right? And because we believe that using the tax code to pay as little tax as possible is one of the foundations of comprehensive financial planning, I want to encourage you to get to our website. Read those articles, What Happens if Biden Wins? and What Happens if Trump Wins?
Request a complimentary consultation because regardless of who wins the election, there will be obstacles and opportunities you’ll want to be aware of when planning for the next president. You’re going to need to act on days after the election. Read those thoroughly and request your complimentary consultation.
More Tax Increases
We’re going to dive into these different tax increases that are under Joe Biden’s plan. And we’re going to talk a little bit more in detail about those. Again, we’re not going to go through in detail here on the radio. We want you to read the actual articles and get to the sources of where we got the information.
We began on the last segment talking about a list of tax increases in Joe Biden’s plan. How would this impact you individually? And what are the policies for both candidates, and how will those impact the economy, labor force, businesses, and you, the individual? How does it affect you?
Cause and Effect
Bud Kasper: Dean, in my part of the article, I wrote this thing called cause and effect. And it’s this, the old science thing, right? Where you came in and said, “Well, what’s the cause, what’s the issue? We need money. What’s the effect? We need to raise taxes.”
So then you go to the other side of the question, and you go, “Taxes were raised. Why?” Because we’re spending too much money. So when you look at the cause and effect associated with some of these things that we’re talking about now, and I’m looking specifically at increasing the corporate income tax bracket, many would say, “Okay, I don’t think that it’s that bad.” But you need to see what the effect is of that cause.
The effect would be, well, now the company can’t expand as much, which means that they’re probably not going to hire as much. All these other things tie into these events. Once they are past this, sometimes people don’t think about the real bottom line.
I think because of the rollback- And I’m not trying to be political here, folks. Because of the rollback on the Trump plan, it allowed business to expand. But if it weren’t for this darn virus, I would love to know if we could go back in history and restarted on February the 19th without the virus and see what would have happened.
Maybe it wouldn’t have worked out as well. I don’t know, but it certainly seemed like it had potential.
Dean Barber: Well, the economy was rolling forward with full steam more than we’d seen in any time that you and I have been in this business, Bud.
Bud Kasper: Yeah, it’s just amazing.
Biden on Social Security & Payroll Taxes
Dean Barber: Yeah. Okay. So let’s go, there’s one here, taxing capital gains as ordinary income for individuals making more than a million dollars. Now, the tax increases Biden is proposing are like much of the tax code that already exists. One tax can cause another tax, and it can cause another tax. And ultimately, you wind up, oh my gosh, I have all this. So before we get into the capital gains and increasing the ordinary income tax rate up to a maximum of 39.6%, let’s talk about Biden’s plan for Social Security. Because Biden’s plan for Social Security calls for a payroll tax, the FICA tax, which now ends, and I think it’s somewhere in the $135,000 range-
Bud Kasper: Yes.
Dean Barber: -that you pay that 12.4%. You pay half, and your employer pays half. What that does then is it says, “Okay, we’re not going to tax that anymore.” Why? There is a maximum amount of Social Security available regardless of how much you’ve paid into the system. And I think that’s a way of means-testing, right? So even if you are at the very top end of that and you’re making more than that $135,000, you’re paying in more than somebody making $100,000, but your benefit won’t be any greater-
Bud Kasper: No. That’s right.
Dean Barber: -than that individual.
It Stacks Up
So what Biden wants to do is he wants to take that from $135,000, and then he’ll let you not pay any payroll tax between $135,000 and $400,000, but then the payroll tax will come back in on every dollar over $400,000. So what does that mean? If we raise the tax rate back up to 39.6%, and then we put on top of that a 12.4% payroll tax, and then we put on top of that the state income tax, individuals who will make over $400,000 per year will now be paying somewhere between 52 and 65% of their money that they earn will be gone—gone to taxes.
Dean Barber: Okay. That’s onerous. I don’t care who you are. That is onerous. When you’ve got more than 50% of your income going out the door to taxes, look, I get it. If this was on the billionaires, the ultra, ultra-wealthy, but this $400,000 of income-
Bud Kasper: For a two-income family. Right.
Dean Barber: -for a two-income family. Come on. That is by no stretch wealthy.
Bud Kasper: Right. And yet that’s what’s going to happen if he gets elected. And again, I’m not trying to bias this, and please, believe me, we’re trying our best. But we have to recognize as well what some of the policies are and how we should react to them.
Dean Barber: Right. Okay. So let’s go back one further.
Bud Kasper: Okay.
Increase Taxes on Corporate America
Dean Barber: Now, what did you have to do? He also wants to increase the taxes on corporate America back up to 28%. So he wants to roll back everything that Trump did under the Tax Cuts and Jobs Act. If that corporation happens to employ people that are making more than $400,000, that corporation is now going to have to pay the 6.2% payroll tax-
Bud Kasper: That’s right.
Dean Barber: -on that income over $400,000, which they haven’t had to do. So now you’ve got a double increase in taxes on corporate America. How’s that going to be paid? It will only get paid through passing along the increase in taxes in the form of higher cost to the consumer, or it may be passed along in the form of layoffs or not hiring more workers.
Bud Kasper: Right. And of course, the more money that goes back to Uncle Sam. We don’t mind paying taxes. In fact, I think we should pay taxes. How else can you function as a government if you don’t have those? But when it becomes just excessive, and you’re pointing out specific individuals, specific industries, and a whole other subject right there, that penalizes them. You take away the compounding effect that corporations can bring to America’s economy through its growth.
Nobody Knows What the Outcome Will Be When Planning for the Next President
Dean Barber: And there’s no question, Bud, that whoever is elected, we don’t have any clue who it’s going to be. We can look at the polls, and we could say, “It’s going to be Joe Biden.” And we can look at the polls and say, “I don’t believe the polls. It’s going to be Donald Trump.” Nobody knows. Right?
We may not even know the day after the election the way that all the hype is going on both sides of the aisle. But my point is that regardless of who wins, you better be ready to make some adjustments to what you have going on in your overall financial life.
Bud Kasper: Many people might be saying, “Well, all you’re talking about is Biden’s policies over there. What about Trump’s?” Well, we know Trump’s. There’s nothing new that’s coming in on that side of the equation. That’s why we’re focusing on something we haven’t talked about before.
Dean Barber: Well, because you haven’t heard a lot about Biden’s policies in the mainstream media, Bud. We need to talk about what they are, and we need to understand how they impact, not just the average person, but how they affect you individually?
Bud Kasper: Right.
Dean Barber: So that brings me to think of something that I’ve been thinking of a lot lately, which is-
Bud Kasper: Cold beer?
Dean Barber: Cold beer. Yeah.
Bud Kasper: Play ball.
The Polarizing Politics
Dean Barber: The question that comes to my mind in this polarizing political environment that we find ourselves in for the last four years is worse than anything I’ve seen in my entire lifetime, Bud. The question I have is when did we stop becoming Americans first and then a Democrat or a Republican second? And you know, I thought, and I don’t know why I did. I figured when this coronavirus hit that we could come together as a country and set the politics aside and do what’s right for the United States of America instead of trying to sneak in different things within these stimulus packages that are going to benefit somebody in our constituency. I don’t get it.
Bud Kasper: I agree.
Dean Barber: I don’t get it. Why can’t we stand up and just say as Americans, we’re Americans first. But I have friends that are Republicans. I have friends that are Democrats, and you know what? It’s okay because we’re still Americans first.
Where Are the Moderates?
Bud Kasper: Sure. Of course. If you look back in history and you look at what was referred to as blue dog Democrats. They were Democrats, but a little bit more on the conservative side. And they were reachable, if you will, on specific issues that were coming up on votes that perhaps they might have voted along with Republicans. And of course, that worked on the other side. I don’t know if they had red dog Republicans, but-
Dean Barber: I’m sure.
Bud Kasper: -you know what I’m talking about from that. And I think that the issue associated with that is we’ve lost that middle ground. It’s so far left, it’s so far right that we’ve lost that middle ground that really should be what America represents.
Dean Barber: Well, I don’t think we’ve lost it, Bud, I just think it’s been silenced.
Bud Kasper: Okay.
Dean Barber: I think that what you hear because of social media, and I’ll blame social media and the internet, is the people that are so far left and so far right have a voice and they’re louder than everybody else that is in the middle. Right? And that does have some ability to have an adult conversation and some decent dialogue without just slamming the other person.
The Electoral College
Bud Kasper: Right. Totally agree. Dean, I want to change up a little bit and talk about the voting process since this is what, 40 some odd days away from the time that happens and revisit 2016. If you will recall, and I’m sure everybody does, Mrs. Clinton won the election from the popular vote with 65,853,514 votes. That represented 48.2% of the popular vote—President Trump, then-candidate Trump, had 62,984,828 votes, or 46.1%.
But my point with that is the Electoral College, Dean, is what ends up electing the president, not the popular vote. So you might say, “Well, I don’t understand this. What good is the popular vote?” That is supposed to be the direction that the electors, every state has a certain number of electors, and that is supposed to influence how the electors will vote. That’s how the president is elected.
The Popular Vote
The electors don’t have to follow the popular vote. In fact, what ended up happening is in the electoral vote, in the Electoral College, it was 304 in favor of Trump and only 227 for Mrs. Clinton.
Dean Barber: So if you look at an Electoral College vote, it was a landslide for Trump. But if you look at a popular vote, it was a narrow victory for Clinton.
Bud Kasper: Right. So if we were doing television, we would show you a map, well, how many electors does the state get? I’m looking at that map right now, and as an example, if you want to look at where the biggest state is, it’s California. They have 55 electors. Then Texas and Florida are next with 38. And in the case of Missouri, there are ten elector votes, and Kansas has six. And there’s a formula that is associated with that as well.
Nonetheless, that’s where those electors come from. So when you say the popular vote should be what elects the president, sorry, it doesn’t work that way. In fact, you don’t really have to have a popular vote because the electors are the ones that are going to ultimately determine the vote.
Now, that will never happen. We don’t want it to happen. There were reasons for this folks. The founders established the Electoral College to determine the United States president.
Dean Barber: Right. And if you have questions about that, obviously go out and do your research and read about it. But I believe that the Electoral College was founded with good intentions, and it’s worked very well for our country.
Bud Kasper: There have only been five times that the Electoral College ended up electing a president that wasn’t the popular vote.
Back to Step-Up in Basis
Dean Barber: All right. Let’s continue on the Biden tax plan. There’s a lot out there. Obviously, just because these are in Biden’s tax plan doesn’t mean that if Biden becomes president, all these things will go through. Because we have no idea what the makeup of the House of Representatives will be after the election. We also have no idea what the makeup of the Senate will be. Now, I would say, Bud, that if Joe Biden wins and we get a Democrat-controlled Senate and a Democrat-controlled House, these policies will probably all get done and probably some more.
Dean Barber: So let’s talk about the step-up in basis and ending that, right? Bud, you and I, we do tax planning for our clients with our in-house CPAs. We do estate planning for our clients with our in-house estate planning attorneys. And one of the things that we look at when it comes to taxes and estate planning has a lot to do with each other.
Bud Kasper: Yeah. Absolutely.
Dean Barber: They tie in very closely to your overall financial plan. I think you gave an example a little bit earlier in the program, that if you have somebody who is sitting on, let’s say some Apple stock that they happened to buy 20 years ago. It’s worth a million dollars, and they only paid $50,000 for it, we would say, don’t sell that if you’re in your 70s or 80s because what we want to do is we want to allow your beneficiaries to inherit that stock, therefore, getting a step-up in basis. Then the cost to your beneficiaries will deem to be the value of the stock the date of your death. Then they can sell it, and no capital gains tax will do.
Biden Plan Would Get Rid of Step-Up in Basis
Dean Barber: However, the Biden tax plan would eliminate that, therefore causing whatever you paid for that stock, that property, whatever it is, land, to go, and your beneficiaries would have to capture that basis that you paid, therefore causing your heirs to pay taxes on all the gain, which, Bud, that step up in basis has been in our tax code for decades.
Bud Kasper: It has, and it’s worked out inside our estate plans that have been calculated around these laws and for someone that they come in and all of a sudden pull that rug out from underneath the taxpayer is, in my opinion, abhorrent.
Educate Yourself and Plan for the Next President
Dean Barber: Well, it’s as bad as what happened in the SECURE Act. And we’ve got a video out about the SECURE Act.
I want you to read What Happens if Biden Wins? What Happens if Trump Wins? I want you to watch the SECURE Act video as we talk about what the SECURE Act did to estate planning and tax planning. And then I want you to request a complimentary consultation where we can visit with you by phone. We can do a web meeting, or you can visit us in person.
Let’s talk about your situation because either way, whether we get Trump or whether we get Biden, there will be either opportunities or obstacles that you’re going to need to prepare for just days after the election when planning for the next president. You don’t want to wait to do this. Get out to our website, request that complimentary consultation, download all those items that I’m talking about. And you can also give us a call and request that complimentary consultation. Thanks so much for joining us here on America’s Wealth Management Show. I’m Dean Barber, along with Bud Kasper. We’ll be back with you next week same time, same place. Stay safe; stay healthy.
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The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.