Faw Casson

Accounting and Accountability: Episode 4


October 23, 2020

Episode 4: Presidential Candidate Tax Plans and the Queen of Mean
 
 
 
Tammy:  So you know how we always start with some pretty exciting information that’s going on and just about the time I think we are running out SURPRISE!
Brian: HEY!!
Tammy: Right, so right now this was just recently announced I think even yesterday and this is for our poultry friends, our growers.
Brian: Yeah they really need some help!
Tammy: Yeah, Yes, well help has arrived so we’ve of course put this out already because we are vey timely with this information but just to let our poultry growers know there’s a program out there to give some relief per house which is good and then if you had to de-populate any birds due to Covid there is some additional relief.  And basically there’s three things that kind of to keep in mind.  It’s really brief in the application, it’s extremely simple, so you have to be an active grower with a contract, you have to have a CAFO permit, which is for basically a small animals which I’m sure if you’re a contractor grower you do. And then you just have to make sure you don’t have business interruption coverage through your insurance carrier.  That simple, there’s a link we provided on our Facebook page “FAW CASSON” and we just wanted to get that news out.
Brian: Yeah, a couple of things on that,  I’ve heard on that a couple of the big poultry companies had to kill at times over 2 million birds! That’s insane.
Tammy: and that one,  luckily that one is a separate criteria from the 1,000 per house, which is capped at 5,000.  So for the large growers this is going to be some pretty good relief.  So happy to hear that our state is helping out our poultry growers. 
Brian: Just to add to that some of you might not realize if you have business interruption insurance sometimes the insurance company’s or  brokers will throw that in there and all that really means is in your policy is if your business stops or shut down for certain reasons there might be some insurance coverage available to you so you can’t get the relief. 
Tammy: Now I don’t know what the difference is between lets’ say you have the coverage but I know some policies are written pretty specifically and if you don’t meet the requirement maybe you weren’t able to collect on it.  So definitely look at your policy and visit that so that you know cause its something you have to agree that you did not receive. 
Brian: Well that’s good stuff I’m glad they need some help.
Brian: I’m going to talk a little bit about some Trump VS Biden tax law.  Ok So I get a lot of questions, of well if Biden wins the election what’s going to happen?  You know we had a  whole new tax act back at the end of 2017 and it was kind of, there was a lot of stuff that got changed then and a lot of people are saying if Biden wins we are going to have to revamp it all over again. 
Tammy: Yeah, I’m even not sure, so I’m glad your sharing this because  I think it’s helpful if we know some of the big differences. 
Brian:  Right.  So I’m just going to touch on a few.  There’s quite a few on here I’m going to touch on the ones our listeners may be concerned about.  So individual tax rates. Obviously individual tax rates reduced with the tax jobs creation act well Trump is considering a 10% middle class tax cut, so the middle class kind of under $400,000 is kind of what the society looks at as middle class, another 10% cut.  Biden wants to increase the top rate back to 39.6% which it’s now currently at 37% and he wants to make that for anybody over $400,000 which right now it’s not that low.  So that’s one big thing that’s coming down the pike.  Now I know we talk a lot about the capital gains taxes so Capital Gains taxes is a tax you pay on the sale of a capital asset, typically you equate that with stock.  So if I sell a share of Coke A Cola stock that I’ve owned for over a year I pay a lower rate, the highest capital gain rate right now is 20% and the lowest is 15% depending on where your income lies.  Trump wants to break that back down to 15% across the board and he also wants to put it in this thing called “Indexing for inflation” meaning if I bought a share of stock for $1,000 and I’ve held it for 10 years I can increase that costs basis by inflationary rates.  So it’s kind of like if by the time my ten years is up it might be 11.5% so that would reduce your capital gain. 
Tammy: That’s interesting.  Because I know there has been counter talks on that, of having people pay tax on the inflation of there stocks over the years. 
Brian: That’s correct.  So they are saying I paid a $1,000 if I bought it today how really much would I pay for it.  And Biden wants to basically  anybody that’s over a million is going to pay 39.6% on their capital gains.  So he’s basically saying there’s no 20% - 15% when you reach that limit your going to pay taxes. 
Some child incentives there were some changes to the earned income credit, child tax credit with the jobs creation act.  Biden wants to actually enhance that to expand the dependent care credit to $8,000, that’s A LOT!
Tammy: Wow it went up to $3,000 per child, that’s a big big addition! 
Brian: Itemized deductions there was a huge change on that with the new act.  Trump just wants to extend those provisions because they expire in 2025.
Tammy: and you know I don’t know how you feel about that but, I think that has really played out well.
Brian: I think so the higher standard deduction you lost your personal exemption.  You know overall I think folks got more money back, not a ton but alittle bit.  Biden wants to bring back what’s call the “Peace Limitation” and that was where you had to take, you had to reduce your itemized deductions when you reached a certain level so they phased out so to speak.  So that’s what he wants to bring back. 
Tammy: I was wondering when that was going to creep back in.  Because really we’ve had that, oh my gosh most of my career.
Brian: Yeah the Peace Limitation has been around for quite awhile.
Brian: Social Security Taxes so kind of Trump wants to kind of  get rid of them so to speak.  We’ve talk about that on previous conversations you and I’ve had.  Biden want’s to increase the Social Security limits, right now if you make up to $137,700 you pay 6.2% out of your pay check he want to increase that to $400,000,
Tammy: Wow oh my gosh
Brian: I know right!
Tammy: that’s huge!  That’s a big tax increase!
Brian: that’s 6.2% out of your pay, I mean yeah.   On the corporate side they reduced the corporate rates to 21% no change for Trump but Biden wants to basically institute very much more of a complicated 28% tax but then a 15% minimum tax on company’s reporting over 100 million in the US but pay no tax.  So they have 100 million dollars of revenue but with the deductions and everything they got to zero he’s going to impose some sort of 15% tax, I’m not sure how that’s going to play out.  But that’s a big deal. 
Tammy: I know the ads, a lot of the ads have been saying that he’s for reducing the middle class but really wants to make corporations pay that haven’t. So what your saying there kind of feeds into these ads. 
Brian: A couple of more things.  Depreciation, we talk about that a lot, right now you can pretty much well right now you can pretty much write off anything, except brick and mortar.  Basically Biden just wants to get rid of a lot of that.  Go back to some of the older rules starting it out through the life of the asset.  I know you’ve heard a lot about the 20% deductions it’s called the “PVI Deduction”.  Basically Biden wants to get rid of that for any Real Estate Investors and folks making over $400,000.  So the 20% deduction basically applies to anyone right now for the most part, there are some complications to it, he just wants to basically get rid of it for anyone making $400,000 and any real estate investors.
Tammy: Well I know previously there was a lot of question around Real Estate investors and remember even we originally studied this and we kept on top of it right away.  We even kind of thought it was for business owners and did they mean real estate and you know they never really came back with a definition of if I own one does that define me around 20% and we never really did get an answer. 
Brian:  There’s is a lot of grey area around that.  And finally the big one that you might hear a lot about is the Estate Taxes.  So right now the state exemption is alittle over 11.5 million dollars meaning if I die tomorrow and I’m worth less than 11.5 million dollars my estate pays no tax.  And basically Biden, want’s to siginifcantly reduce that to either 3.5% for 5 million and he wants to get rid of the stepped up in basis.  And what that means is if I inherit something from lets say my parents, I inherit it at the cost basis of the fair market value of  that day.  So if it’s worth 1 million bucks then its 1 million bucks in my hand and if I turned around and sold it the next day I would pay no tax.  If you take the stepped up in basis away you inherited that for what they paid for it.  So it might be $20,000 now you have to pay tax on the difference the Capital Gains. 
Tammy: It’s kind of like taking away the value of the exemption period.
Brian: I mean you pay tax all through your life and then you have to pay tax when you die.  It sucks and the tax rate is 40%. 
Tammy: you would hope they would adjust that tax rate back down.
Brian: But for right now it’s been, not many people our country are worth 11.5 million dollars.
Tammy: and now If your smart and you leverage your estate with a spouse you could leverage that to 23 million.  That’s a huge leverage point!
Brian: That’s right! You have a good point if your married.
Tammy: So some of the big takeaways I heard is the Capital Gains in the Biden Administration could go up to 39.6% if you’re a high income earner like 1 million and above.  Social Security limit is a little bothersome because there’s a big difference between 137,700 and 400,000. 
Brian: and you know there is a lot families, families of four, families of five who might make $200,000 that’s great but 6.2% on all the rest of that money.
Tammy: That’s a lot out of their pockets.  Increasing child care is great because now adays we have a two income earner households.  And children are in daycare and the estate thing you just mentioned WOW, WOW
Brian: Big differences, big differences!
Tammy: of course we will keep our eyes on this and your right, the only good thing is you know we are well into 2020 and we are tax planning so these kind of big changes wouldn’t probably be on the horizon until 2021 or 2022’s tax year probably.
Brian: Yeah, Biden says he’s going to change it right away if he wins but that’s going to take awhile.  To get through Congress and the Senate. If it does get through the Congress and the Senate.
Tammy: Governments right away is a little bit different than our definition of right away.  Well good information WOW.  Thank you for that. 
Brian: Yeah enjoyable!
 
 



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