As Democrats prepare to nominate former Vice President Joe Biden on Thursday to oppose President Donald Trump, the party platform calls for tax increases and yet another regulation redo on annuity sales standards.
Still, despite record profits under Trump administration policies, some segments of financial services are donating more money to the Biden camp. Take banks, for example. A story last week in Politico revealed that individuals affiliated with the six largest lenders donated $907,216 to Biden and $293,434 to Trump.
As a longtime senator from Delaware, Biden cultivated close relationships with many banks. Despite that, some analysts say banking executives are voting on issues beyond their bottom line in a bid for change.
For sure, the Democratic platform, produced with significant help from Sen. Bernie Sanders, I-Vt., commits a Biden administration "to forging a new social and economic contract with the American people—a contract that invests in the people and promotes shared prosperity, not one that benefits only big corporations and the wealthiest few."
More (And Higher) Taxes
On taxes, the Democratic platform leaves no doubt what a Biden administration will do.
"A guiding principle across our tax agenda is that the wealthiest Americans can shoulder more of the tax burden, including in particular by making investors pay the same tax rates as workers and bringing an end to expensive and unproductive tax loopholes," the platform reads.
"Corporate tax rates, which were cut sharply by the 2017 Republican tax cut, must be raised, and 'supply-side' or 'trickle-down' tax cuts must be rejected."
The possibility of a Biden administration -- the challenger holds a 8- to 10-point advantage in most polls -- means many advisors need to set up their clients to maneuver their assets to take advantage of favorable tax rates before the end of the year, said Robert Keebler, a partner with Keebler & Associates, a tax advisory and CPA firm in Green Bay, Wisc.
Waiting until the election is decided is not smart, Keebler said during a recent webinar, as any decent accountant and firm will be booked solid through the end of the year.
Smart planning will likely mean huge savings for clients, Keebler noted. For example, Biden wants to restore the 39.6% top tax rate for capital gains. That is a big jump from the 20% top rate set in the Tax Cuts and Jobs Act of 2017.
Other tax ideas Biden has endorsed include:
- Personal income taxes. Eliminating the current top ordinary income tax rate of 37%, raising it to 39.6%, according to an analysis from the Tax Policy Center.
- Estate taxes. The Democratic platform calls for returning estate tax to the "historical norm." The 2017 tax bill doubled the amount that individuals can pass on before the 40% estate and gift tax kicks in. In 2020, that number is $11.58 million.
- Social Security taxes. Biden has supported increasing the earnings that are subjected to the Social Security payroll tax to more than $400,000, according to the Tax Policy Center. Wages up to $137,700 are subject to the tax as it stands, with the employee paying 6.2%.
The Democratic platform includes a section titled, “Guaranteeing a Secure and Dignified Retirement." Among other things, it outlines the party’s commitment to reversing best-interest annuity rules the Trump administration pushed through the Securities and Exchange Commission and are nearing completion at the Department of Labor.
“We will take immediate action to reverse the Trump Administration’s regulations allowing financial advisors to prioritize their self-interest over their clients’ financial wellbeing,” the draft stated.
The stance could be viewed as payback for the Trump administration abandoning a fiduciary rule put in place by the Obama-Biden administration. That rule was eventually tossed out by a federal appeals court.
The stakes are high at this point, however. The industry and regulators have done a lot of work to craft a consistent rules structure across state insurance departments, retirement plans via the DOL, and brokers through the SEC. If Biden torpedoes the DOL and SEC efforts, it puts life insurance and annuity sales rules back to square one.
The Trump replacement rule has two main parts: a new exemption allowing advisors to provide "conflicted" advice for commissions; and a reinstatement of the "five-part test" from 1975 to determine what constitutes investment advice.
Biden's running mate, Sen. Kamala Harris, D-Calif., was among 29 House and Senate lawmakers who signed an Aug. 6 letter urging the DOL to withdraw the rule.
"There is no reason for the DOL to arbitrarily rush and continue down this wrong path," the Aug. 6 letter reads.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.
© Entire contents copyright 2020 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.