Many pre-poll surveys and opinion polls have predicted a comfortable win for democrat Hillary Clinton over Republican Donald Trump in this year’s Presidential Election in the US. This has caused the rich and their financial advisers into a tizzy and ducking for covers. The reason is that Mrs. Clinton has openly called for a changed tax regime if she wins the election. Under the new taxation structure, she intends to tax members of the top 1% income bracket at a much higher rate.
Changes preempted by the wealthy
Hillary Clinton has said in recent debates and primaries that she would introduce a fair share surcharge of 4% on those who earn over $5 million annually. She has also proposed tax hikes on incomes of those who earn over $250000 every year.
Some of the top accounting and wealth advisory firms in the country have conceded that their recent interactions and discourses with their high net worth clients have revolved around the upcoming elections and what could happen if the Democrats do occupy the Senate, given that the GOP has a majority in the House of Representatives.
Can she make changes to tax laws if elected to power?
Although making changes to tax laws is never easy, especially since two different parties would occupy the two houses of legislature, it could ring trouble for the rich if she plans to introduce retrospective taxation which had been once done in 1993 when Bill Clinton had been elevated to the office of the President of the USA for the first time. As there is a precedent, the possibility can’t be ruled out, according to experts. If such a piece of legislation is introduced, it would mean that the taxes could increase right from the beginning of 2017.
Some of the tried and tested formulae for evading tax guillotines legally is to push back the incomes to later years while taking deductions and losses now. However, you could also liquidate your stocks or other high income instruments to avoid paying big taxes on your capital gains next year. Clinton has proposed higher taxes for capital gains made on investments that they have held for less than six years.
Another practical evading tactic is to invest in stable, long-term income generating options like real estate.
Mavens advise against rash moves
Tax and wealth management firms have advised against rash moves, especially ill-timed ones till there is more clarity on the outcome of the election and clear policy guidelines are put into place. Moreover, they have also posited that worries shouldn’t override sound logic. They have also reassured that tax increase won’t necessarily mean increase for every rich individual. Also, normally a tax bill passed in 2017 would only come into effect in 2018, giving taxpayers time to adjust.
While Hillary Clinton’s proposed $1.4 trillion increase in public taxes over the next decade may invoke a sense of foreboding in you, it doesn’t mean it will happen or affect you. Hence, if you go by experts, the time of wait and watch has begun.