UPDATE: Since this article was originally published, Biden updated his clean-energy plan, increasing spending to $2 trillion over a four-year period. There has been no official word given yet on how he would fund the additional spending. According to a Biden campaign official, tax increases on corporations and wealthy individuals are part of the plan. Additional spending would likely be done via one-time stimulus measures that would be added to the national debt.
During a fundraiser Monday with potential wealthy donors, presumptive Democratic presidential nominee Joe Biden vowed to undo most of President Trump’s “sugar-high tax cuts” and said he plans to eradicate tax loopholes used by wealthy individuals, including plans to address the capital gains tax and the stepped-up basis for inherited investments. Biden furthered his attack on Trump’s tax policies, expressing a desire to raise corporate tax rates back to 28% from 20%, as well as implement other tax initiatives.
Biden’s strong stance on capital gains is probably the first thing investors should take note of. Capital gains are the profits made by the sale of a capital asset, such as shares of a company, house, or even jewelry. Capital gains are “realized” by the investor when they sell, and taxes are paid on the increase in value during the holding period.
Currently capital gains from investments that are held for less than one year are taxed at the individual’s regular income-tax rate, which ranges from 10-37 percent. Meanwhile, capital gains on investments held for more than one year are taxed at a reduced rate that ranges from 0 to 20 percent.
As part of Biden’s proposed tax plan which would raise the highest tax bracket back to 39.6% from the current 37%, capital gains for individuals making over $1 million per year will be taxed at the ordinary income rate. This means that investors making more than $1 million per year could see an increase of 19.6 percentage points on the portion of their income that comes from investments. Biden cites a Joint Committee on Taxation report that concluded the special capital gains and dividend rate costs the government around $127 billion each in lost revenue every year.
Despite Biden the capital gains portion of Biden's tax plan decreasing profits for certain investors, the investment of that money back into high-growth and emerging technologies would create ample investment opportunities.
Biden’s ambitious infrastructure and clean energy plans will be the primary players in creating high-growth investment opportunities. Biden’s extensive infrastructure plan calls for an investment of $1.3 trillion over the next 10 years which will be used to revitalize existing infrastructure as well as create new ones for the implementation of clean energy and increased accessibility of high-speed internet.
Because of this, investors will want to watch clean-energy and construction companies closely as election season approaches. Hydrogen fuel-cell and electric trucking company Nikola (NKLA), could see massive jumps in value after a Biden election. While Tesla (TSLA) is in the frontrunner position in terms of making electric vehicles, , TSLA’s inability to consistently deliver orders on time could open the door for NKLA and other companies, such as Workhorse (WKHS) to find their way onto construction sites and gain a commanding foothold in the emerging industry of electric vehicles.
Additionally, hydrogen and fuel cell producer Plug Power (PLUG), could find its way to the mainstream under Biden as businesses will have an increased incentive to lower their carbon footprint. This could push the company, and others, into a period of exponential growth due to incentive-based demand.
