With a make-or-break election in sight, a crucial decision looms that will determine the course of America’s future. We’ve already witnessed the impact of President Trump’s business-friendly 2017 tax reform. If Joe Biden is put in control, the changes would be drastic.
Biden’s tax plan would effectively turn back the clock, putting the marginal rate for top earners back to 39.6%, where it was during the Obama era. Currently, that rate is 37%. If Biden somehow manages to beat Trump, and if the Democrats retain the House of Representatives and flip the Senate, this could theoretically happen.
J. P. Morgan Chase Chief Executive Jamie Dimon doesn’t see this as feasible, however. Stating that “A wealth tax is almost impossible to do,” Dimon explained that calculating wealth would be “extremely complicated, legalistic, bureaucratic, regulatory.”
In other words, not only would the wealth tax be burdensome, but the government would find ways to screw it up. Furthermore, Dimon characterized the U.S. as a “red tape society” with a bureaucracy that “slows down a lot of business.”
Courtesy: Boston Globe
Dimon also seemed to imply that burdening Americans through taxation and regulation isn’t the answer to our problems. “And I remind people, the world, when you slow down the economy, you are hurting the disadvantaged more than anybody else,” he said.
Evidently, Dimon’s not the only one who’s concerned about the tax implications of a possible Biden presidency. Scott Bishop, executive vice president at STA Wealth Management, said that some of his clients worry about a Biden win sending their portfolios to “hell in a hand basket.”
And it’s not just Biden who would push for more taxation. Vermont Senator Bernie Sanders, for example, would raise the capital gains tax rates for Americans earning $250,000 per year or more. That rate, per his plan, would be 40% for Americans earning between $250,000 and $500,000.
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Senator Elizabeth Warren of Massachusetts would also impose a heavy tax burden on high-earning Americans. Some legal scholars question whether this type of taxation is constitutional, not to mention ethically sound.
Besides, as Dimon alluded to, there are practical issues associated with the types of wealth taxes that the Democrats want to levy. Figuring someone’s net worth is not a simple matter, by any means. Estimating the value of interests in real estate, for instance, can be complex, not to mention rare antiques and artwork.
Moreover, a wealth tax would likely dis-incentivize innovative, disruptive investments. If wealthy angel investors would be subject to a hefty wealth tax every year, they’d be more likely to pull those projects and stick to low-risk, low-reward tax-sheltered allocations.
So, when Jamie Dimon says that a wealth tax is almost impossible, he’s undoubtedly looking at the issue from multiple angles. Just the implementation of this type of tax could cause problems that the IRS is ill-equipped to handle, especially during a pandemic.
Unlike Joe Biden, Dimon is able to speak freely on taxation and doesn’t have to appeal to a voter base that wants to punish the wealthy. Plus, Dimon is responsible for the wealth of high-net-worth clients. He can’t afford to be reckless with people’s money.
Governments, on the other hand, are notorious for being irresponsible with other people’s money. If more wealth is redistributed to the government, do you truly believe that those funds will be used efficiently?
You don’t have to be wealthy to appreciate what’s at stake here. Hopefully, the nation will make the right choice in November.
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