Moves to Make if You Think Taxes Will Rise Under Trump or Harris
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As Congress is debating all these different individual tax provisions that are set to expire at the end of next year, whichever candidate it is for new tax cuts, they're going to have to get money somewhere.
We'll talk to Wall Street Journal personal finance reporter Ashley Ebling after the break.
Some taxpayers are looking ahead to the next administration and making adjustments to their portfolio to hedge against higher taxes, no matter who is elected president. Wall Street Journal personal finance reporter Ashleya Ebling joins me. Ashleya, catch us up on where the candidates stand on taxes. First, former President Donald Trump.
Trump's been saying he'd like to lower income taxes and raise tariffs. He also has a whole host of aspirational tax proposals saying he would want to remove taxes on Social Security benefits and remove taxes on tip income for tipped workers. The big thing that's coming up is he wants to extend the tax overhaul that was passed in 2017. And that's the big individual tax overhaul that's set to expire next year.
And how about Vice President Kamala Harris?
She, on the other hand, would raise taxes on the rich, proposing a new top capital gains rate of 28% for the highest earners. She'd also proposed increasing investment income surtax. That's a 3.8% tax on capital gains and dividends, interest and other income that kicks in at $200,000 of income for single taxpayers and $250,000 for married couples. So she says she supports the Biden administration budget proposals, which would include raising that tax to 5% at a $400,000 income level.
Regarding the 2017 tax bill, which you mentioned a moment ago, which is up to Congress whether to extend, if lawmakers do nothing, how could tax brackets change?
So if Congress does nothing, which if there's a divided government, who knows what might happen, the tax brackets would revert back to the pre-2017 tax bill. And that means the tax rates would rise across income brackets. And the top 37% rate, for example, would rise to 39.6% and kick in at a lower level of income.
If people feel that taxes will rise in the next administration, how do financial advisors suggest they could prepare for that?
So some financial advisors I spoke with who have wealthy clients say they've actually been starting to sell stocks to lock in that 20% capital gains rate. And even at lower levels, that makes sense. Some have been exercising stock options. And I even talked to a man who's been finishing up selling shares in his business.
You also spoke with a man from South Carolina who is confident whoever wins will have to raise taxes. Why does he feel that way?
So like some people, they think like whether it's Trump or Harris, that it's just our national debts kind of beyond comprehension is the way he put it. So eventually taxes are going to have to go up. And also there's the issue with the tax cuts when as Congress is debating all these different individual tax provisions that are set to expire at the end of next year, and they're looking at all these proposals, whichever candidate it is for new tax cuts, they're going to have to get money somewhere.
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