Biden's sweeping changes to tax law will impact millionaires like Bill Gates, Jeff Bezos

In less than two months after his inauguration, US President Joe Biden unveiled significant changes in the nation’s tax law. While the American Rescue Plan has been enacted in the United States and is part of Biden’s three-part program, the American Jobs Plan and American Family Plan are on the proposal stage and far from being implemented. The American Rescue Plan provided cash payments to individuals including a number of separate tax law changes that benefitted lower-income people and families. On March 31, Biden proposed the American Jobs Plan and on April 28, he announced the American Families Plan that includes proposals to increase taxes for wealthy individuals. 

How will Biden’s tax plans impact the richest personalities?

Reportedly, wealthy personalities such as Amazon Inc’s founder Jeff Bezos and Microsoft co-founder Bill Gates will be impacted. As per Bloomberg report, Bezos who has an ex-wife, four children and billions of reasons to watch if Biden’s tax overhaul wins approval in Congress. Amazon Inc founder’s heirs may reportedly have to pay more than $36 billion if the US President’s proposal succeeded in closing a loophole that enables the rich to transfer most of their fortunes tax-free at death.

Under the current unchanged rules, whoever inherits the Amazon shares that Bezos bought in 1994 for $10,000 and are worth $180 billion now, will receive a so-called set-up in basis, wiping out any capital gains tax liability. However, Biden’s plan would shut that loophole and apply the top capital gains tax immediately when assets transfer to the heirs. Reportedly, if the rate increases, it is 20% for holdings like that of Bezos’ and the US President called for boosting it to 39.6%, the eventual tax bill would also shoot up.

Meanwhile, for Bill and Melinda Gates, who announced on May 4 that they are divorcing, a change in the US tax law and step-up rule might be comparatively less expensive. As per the report, the Gates fortune which is valued at $145.8 billion is not only older, but the couple has already sold or donated most of their stake in Microsoft Corp. However $26 billion of Microsoft shares still remain and it remains unclear how the couple will split their assets.

How much current tax law costs Congress?

Congress has reportedly estimated that stepping up the tax basis of inherited assets costs the government nearly $43 billion a year. Therefore, ending this significant practice and raising the rate would further amount to the biggest curb on dynastic wealth in several decades and would alter the entire American economic landscape that presently, as per critics, is dominated by a few wealthy families. The proposals are still far from becoming law even though Democrats control both the houses of Congress because they threaten wealthy donors to both political parties.

Image credits: AP