3 minute read 10 Nov 2020
Starry sky over Capitol building

Joe Biden is President-elect: What’s next for US tax and trade policy

By Michael Mundaca

Ernst & Young LLP US National Tax Department Leader

Experienced tax professional focused on global and US tax policy and international tax planning.

3 minute read 10 Nov 2020
Related topics Tax COVID-19 Election

Tax, healthcare, immigration and climate policy are key areas where the incoming Administration likely will diverge significantly from the Trump Administration.

In brief:

  • Continuing economic damage from the pandemic may limit President-elect Biden’s* ability to pay for policy priorities with tax increases.
  • Biden will face similar questions as were faced after the 2008 financial crisis: When does the need to provide economic stimulus yield to the need to pay down the debt and reduce deficits?
  • Political realities may limit his policy ambitions as well.

Although President-elect Biden had previously signaled that tax increase plans would be implemented on “Day 1,” it appears now that such plans may wait until after the virus and its effects are addressed. The likelihood and scope of any such changes will become clearer only after control of the Senate is decided.

If the Senate remains in Republican control, the chance of significant tax legislative changes lowers significantly, and a Biden Administration may look to changes that can be made without Congress, such as through the regulatory process.

Companies must also consider potential non-US developments, including responses to fiscal concerns arising from pandemic relief and stimulus measures (e.g., tax increases to address deficits). They must monitor the Organisation for Economic Cooperation and Development (OECD) BEPS 2.0 project. The changes Biden has proposed to the existing global intangible low-taxed income (GILTI) tax rules in the United States would more closely align those rules with the design the OECD is pursuing. Thus, one might expect a Biden Administration to continue to be supportive of that part of the project. However, under a President Biden, the OECD’s proposed changes to tax jurisdictional and profit allocation rules that would target income from digital services, would remain of real concern to the US government.

Regarding trade, Biden has stated he believes in “fair trade,” and he likely will re-engage multilaterally and with allies.

*“The election results will not be certified by the Electoral College until 14 December, and several state recounts and legal challenges are ongoing.”  

Summary

Although President-elect Biden had previously signaled that tax increase plans would be implemented on “Day 1,” it appears now that such plans may wait until after the virus and its effects are addressed. The likelihood and scope of any such changes will become clearer only after control of the Senate is decided.

About this article

By Michael Mundaca

Ernst & Young LLP US National Tax Department Leader

Experienced tax professional focused on global and US tax policy and international tax planning.

Related topics Tax COVID-19 Election