[BREAKING] What Joe Biden’s tax plan means for Small & Medium-Sized Business Owners

13 min readNov 20, 2020

A dive deep into tax implications post-election*

This special program focuses is on all of the things that are happening post-election that are happening post-election: Our president-elect Joe Biden’s tax plan, what’s going on with our economy and inflation, and how these will impact businesses. Also, we discuss the ballot measures that have been passed across different states in the nation that will affect small and medium-sized businesses.

Tim Mahoney is a principal with Clifton Larson Allen and is going to dive deep into tax implications for the new election.

Original Story: Link

Taxes = An increase is coming

President Elect Joe Biden tax platform is squarely aimed at income earners above $400,000 viewing to raise the tax rates for higher earners & nearly doubling it for those that make over a million dollars a year.
Increasing the tax rate on corporations to 28%

As CEOs & entrepreneurs, we are focused on 3 important things:

1) Joe Biden’s tax plan

2) Inflation and the US economy

3) Measures affecting the nation & small/medium-sized businesses

Inflation & GDP:

Spot price for gold = 60% increase.
According to TaxFoundation.org, we should see a 1.62 % reduction.
The median price for all housing types was $311,800 during the month, up 15% from a year ago when the median price was $271,500.

The minimum wage laws your business must follow depend on the state (and sometimes city) where you are located.

The minimum wage is the lowest allowed employee pay rate. It differs by state and sometimes city.
Federal minimum wage laws determine acceptable wages, overtime pay and exemptions to both.
Minimum wage jobs generally require employees to serve or constantly interact with customers.
This article is for small business owners and human resources professionals who have or will have employees and are looking to learn the minimum wage laws they must obey.

Business owners planning for the future ahead

Looking at the election results, more challenges are ahead of us as business owners. Florida is joining 7 other states — and 33 cities/counties in the US — on raising their minimum wage floor to $15 an hour.

If you want to hold costs down, MyOutDesk is with you 100%. Let’s talk about it.

At MyOutDesk, we’re beating minimum wage. Output is FAR significant, and your dollar goes a long way with experienced virtual assistant professionals!

Wage Floor at $15 per Hour:

Your dollar can go farther with the experienced talent that we help you find, which is under the $15/hour wage floor. You can pay $15/hour for entry-level & zero-experience talent — or pay even less for proven & educated professionals.

In trusting in virtual assistance, businesses can do more while local employees and talent can be less distracted on grunt work — so that your money can be better spent on what’s most important for you and your community.

Get more for your money — with college-educated, career-oriented, and experienced VIRTUAL ASSISTANTS for much less than a minimum wage worker!

Experience The Difference
MyOutDesk can save you up to 70% on employment cost
Claim a free business strategy consultation & ‘Grow Virtual’ Guide

Did You Know? MyOutDesk’s origin story is set during the last global financial crisis of 2008. Yes, that’s right — our business started by scaling businesses with virtual assistants during a recession! Pioneers of virtual assistant services, our first client in 2008 went from five to seventeen VAs with a completely revamped organizational model in short order, and he told MyOutDesk, “Our virtual professionals have shaved $250,000 off our monthly overhead.”

Transcription

Hey everyone, Daniel Ramsey here with Scale The Show. I’m really excited. Normally we interview CEOs, entrepreneurs, and to get actionable strategies to grow and scale businesses.

But today, our focus is on all of the things that are happening post-election that are happening post-election: Our president-elect Joe Biden’s tax plan, what’s going on with our economy, and inflation, and how that will be impacted. Also, propositions and measures that have been passed across different states in the nation that will affect small and medium-sized businesses.

I am your host and founder of MyOutDesk, and today’s episode is going to be good. Before we jump in, I just want to note that we at MyOutDesk are not providing tax, legal, or financial advice. We strive to support the success of all small and medium-sized businesses and want to pass along this useful information that is practical and can help your business drive out effective solutions.

Please consult a qualified tax advisor, attorney, or investment professional for guidance. We need to make that disclaimer because today a lot of what we’re going to be talking about is, you know, tax strategy for small and medium-sized businesses…

Saving expenses, looking at what’s going to happen nationally for your own personal pocket book, and what’s going on now.

The Wall Street Journal put out a really interesting article: “the bid to undo trump policy faces hurdles” and here’s the thing… tax policy is something that affects every small business owner.

There are only so many expenses that we can put into our PL and the operating expense section, and because of the tax policy is affecting how much money we have leftover to reinvest in our employees and reinvest into our businesses, I think it’s a very important topic.

One of the biggest challenges is just simply the fact that under a Democratic president we will see an increase in not only social security taxes, but workers comp insurance will go up as well as payroll tax and associated employee taxes.

Here’s what really struck me. This one is interesting. Mr. Biden would raise the corporate tax rate to 28% and impose a minimum tax on US corporations, foreign income, and many other US-based multinational companies.

What that means is we’re going to see if you’re in a high tax state like California, New York, parts of the Sunbelt. You’re going to see the total number of tax from where we are today in the 40s percentile to possibly all the way up to 60 percent.

Our first guest today is a principal with Clifton Larson Allen and, if you don’t know them, they’re an international CPA firm with more than 6,200 folks in that company.

Tim Mahoney is a principal and is going to dive deep into tax implications for the new election. How is it that we’ve put the fate of the Georgians and, if you’re in Georgia right now, I love you. I really appreciate you, but oh my goodness this our entire future tax situation for the next possibly eight years rests in a senate race for two seats.

Tim what are your thoughts about what’s happening right now in Georgia?

You know I think it’s interesting that it came down with it. They have a rule that you have to win at least 50 percent of the votes and so as of like Wednesday I think we were pretty certain the democrats weren’t going to have control of the senate. It was going to be split between the house and the senate,and the presidency wasn’t really going to be able to dictate what was going to happen when it came to the tax law. Everything was going to stay status quo and then as they finished counting all votes the incumbent republican dropped below 50 percent and so now we have two special elections that don’t take place until after the end of the year. So we can’t even plan accordingly for what may end up happening.

Consensus is it probably will split one and one but there’s a lot of money and a lot of effort that’s going to be poured into those two seats and it’s a really contentious time right now and depending on how how things pull together.

I mean it’s really hard to get a crystal ball out and say with any certainty that it’ll end up being the way we want it to but it does look like it’ll probably end up splitting at least one and one and then the republicans would still have 51 senate seats. As long as there’s a split, there’s probably not going to be a lot of changes.

For sure, we want to talk about changes because President-elect Joe Biden has squarely aimed his tax plan at individuals making more than four hundred thousand dollars. What are your thoughts around, you know,
if the Senate doesn’t go the way we hope it would go? How is that going to impact small and medium-sized businesses here in the US?

It’s really going to cause costs to go up because a lot of it is on the payroll tax side and lifting the caps on what people pay in a social security payroll tax. Now, you’re seeing probably a change with capital gains rates getting eliminated at higher income thresholds. I think overall what he’s talking about is a slight increase in overall rate structure but that’s just a small piece of it.

Out in California and New York and some of the other high state tax, we might get our local tax deduction back through all this and so it won’t impact everyone quite so badly, but they’re predicting in a lot of states a marginal tax rate if you’re someone that makes more than 400 thousand
dollars in excess of 60 percent.

That’s all in that’s your payroll taxes that’s your income taxes and a lot of that comes down to right now the, you know,you get to about 130,000 and you’re capped out.

Now when you get up to that 400,000 mark, you’re adding another six percent on top of what you’re ordinarily paying. That’s not something that’s easy to get around because a lot of small business owners, you know an LLC for example, that gets capped on your self-employment tax but under this new tax plan it wouldn’t. You continue to pay payroll taxes up to a much higher threshold.

Okay so what you’re saying and what’s interesting about this is Biden’s plan and maybe democrats as a whole is to raise taxes specifically on the wealthy and business owners, and go from where we’re in a mid-40s kind of range for the highest possible tax number to above 50. Is that kind of the bottom line?

Yeah, the bottom line it depends a little bit on what it is you do for your business but right now, and we’ll just use California since that’s where you and I are sitting out here right now, between you make $400,000 now. Anything above that, you’re getting taxed roughly 48% between the state and the and the IRS.

Now they’re talking about what other changes they’re moving towards that it would be 61/62 so it’s a big increase for the incomes above 400,000.

So as a CPA and and a principal for CLA, what is your advice to the small and medium-sized businesses in the US that would be impacted uh by this shift in the tax rate?

Well you need to you need to plan ahead. You have to look at what is going to be potentially coming because it’s not just income taxes. There might not be a lot you can do about it given the law that it’s set up. So what ends up happening is things cost more because you’re going to still push to get to the same net income amount that you were making, net of your taxes previously. But labor costs are going to go up because it’s going to all your employees are going to be wanting to be in the same boat there.

It may not increase the tax on the middle class so you might be able to control some of your labor costs there but I think entity structure is going to have a big play in what’s going on.

How you’re getting the money that passes through entities may not be as advantageous as they were previously so you know each person’s situation is going to be different but there’s strategies that can be still be put in place to help you know how to move income to a better tax advantage position but you need to do it in advance.

You can’t wait till after the fact so that’s the problem with the January election versus the December elections. It’s hard to figure out exactly when this might be, you know, it’s other factors. It’s the gift tax rates changing, it’s the exemption on your estate planning that could be changing, it’s the changing capital gains to ordinary income that’s potentially changing. So it’s hard to say exactly if they’d be able to do everything all at once but we know that nothing will be able to be done if it’s split.

So if this is a big concern for you, you should figure out kind of what’s going on with some of Georgia’s politics and maybe make a donation or two to the sides you should prefer.

Tim thanks for joining us today and giving us your feedback on what’s going on with the tax bill.

Absolutely thank you for having me.

Here’s what’s interesting, and if you’re an investor, a small business owner, or anyone in the world, considering tax as part of your cash flow, because as a small business owner we take our profits and our income and we use those to pay our portion of our share of taxes and in many states that already is in the 40 to 50 range.

What’s interesting though is according the taxfoundation.org, if Joe Biden’s tax initiatives do pass, we will see an 1.62 reduction in total US GDP. Gross Domestic Product. That’s the total amount of goods and services sold by everyone in the US, and basically what you’re seeing is this concern or this that the dollar is going to be worth less and because you’re going to see inflation.

What that means is what you have your purchasing power as an entrepreneur as a business owner reduces and, to break all of that down, I’ll give you an example.

According to a CNN another article, the median house price of all types of houses across the US was $311,800 in September of 2020. Basically it’s up 15% from a year ago. That’s up 15% in one year which is a massive increase.

Michael Krein, the founder of the NRBA (National Real Estate Brokers Association), focuses basically on following national trends for foreclosures, and real estate data.

He just sent a text over and he says depending on the new house seat and how strong the republicans are, control of the senate remains so all of this tax stuff is really boiling down to what is going happen in Georgia and whether or not President-Elect Joe Biden and the democrats in the congress will be able to actually make any headway or change to our tax code.

You’re also seeing gold, which is a harbor of value, is where investors go when they’re nervous about inflation. Gold is where the smart investor puts a portion of their total income and total savings because as inflation goes up, so does gold.

If you look at spot prices over the last two years, there hasn’t been a massive change, but if you change the window down to one year you’ll see that gold prices over the last year have increased. Spot prices for gold have increased by 60 percent and so all of this conversation and everything that we’re talking about is about controlling the things that you can control in your expenses as an owner….

Controlling your employee and controlling really the one thing that you can control, which is what you’re spending every month for your business expenses.

I want to introduce a clip of a customer at MyOutDesk, Brian Woods. He’s a business person in Florida and he is an international speaker and trainer.
It’s interesting because he equated hiring a virtual assistant is better than hiring a standard employee at Mcdonald’s.

And that sounds strange, but here’s what’s happened. On a national basis, there are more than 20 states that have passed legislation raising the minimum well above the federal minimum wage, right now at $7.25 and there are only a handful of states, really three, that have no minimums of their own.

Yet what’s happening across the country is this drive and this interest in really making an impact for the low income earners. Our country has decided to pass legislation increasing the minimum wage Florida.

As you heard there, Brian was considering hiring a virtual assistant and because the minimum wage is going up in Florida. He has moved forward with that action and I think it’s not a bad thing for you if you’re considering growing and scaling a company because MyOutDesk is up to 70% off the cost of traditional employment options.

If you’re at all feel yourself needing talent or wanting to scale your business, I want to offer MyOutDesk as an opportunity.

At MyOutDesk, the focus has always been on talent and driving revenue to scale through finding great talent.

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This tax increase is going to make it more difficult to hire quality talent while maintaining a thriving business. Hire a Virtual Assistant, and save your whole operation.

ENVISIONING OF A NEW REALITY FOR YOUR BUSINESS

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MyOutDesk proudly provides additional free business growth guides, books, and strategy calls.

See what we are about, and schedule a free consultation with us. We’ll take the time to learn more about your business and offer solutions to foster top talent and lower operational costs for your company.