Prepare Now for Potential Higher Post-Election Taxes

Corporate executives are preparing for tax rate increases no matter who wins the November presidential election. What’s causing 70 percent of executives to think this way? It all has to do with federal coronavirus-related relief and the proposed tax plans of the candidates.

Executives Surveyed Focusing on Tax Payments

PricewaterhouseCoopers recently released survey findings showing that coronavirus aid, tax deferrals and stimulus spending will affect corporate taxes. Not to mention democratic candidate Joe Biden’s plan to increase corporate tax rate to 28%, which is a 7% increase. President Trump hasn’t said that he will increase corporate tax, but there will be more spending for supply chains to protect against U.S.-China trade tensions.

Looking Towards the Future

Under Biden’s proposal, there will be a surtax for companies. The surtax will be for products made overseas sold to the U.S. The minimum taxes for foreign income will have a 10% tax credit. To prepare, executives are trying to mimic the effects with their cash flow and investment decisions.

Unfortunately, the pandemic has added a level of complexity to tax planning. Campaign proposals lack detail and analyzing tax rates with different percentages can affect finances. Some companies are modeling candidate’s plans to see how their after-tax return will be affected. This can help with financial decisions when it comes to certain transactions and figures.

Many business that benefited from the 2017 tax cuts will now suffer from the tax increases. As Discover Financial Services Chief Executive Roger Hochschild says, “It’s really just we pay more in taxes.”

The ultimate decision will end up being on which party or parties will have the majority of the chambers of Congress. The Democratic Party would need to gain the Senate while holding onto the House of Representatives, and Trump would need the Republicans to take majority of the House while holding onto the Senate.

Preparing for Financial Challenges

In any case, companies are getting ready for the turbulence that will surely come with the November presidential election. By modeling what could happen in a few months now, executives will be able to make changes to mitigate the damage the increase in taxes could cause. The modeling allows businesses to implement a plan before actually needing to make adjustments in their best interest. It’s something that many companies should consider doing to ensure they leverage tax increases in their budget.