Dateline: Kuala Lumpur
What happens if Joe Biden becomes president?
A lot of people ask these questions during every election cycle. What will happen in the country? What will change?
Do you want my two cents?
You’re not going to see nearly as much change as you think whether Biden or Trump gets elected.
Certainly, elections have consequences. I remember being in high school when George W. Bush won the election. They had this massive tax cut that Republicans were all in favor of and Democrats booed for the entirety of his presidency.
It was a big deal.
But did it make a big difference? If you were a high earner, your top marginal tax rate went from 39.6% under Bill Clinton down to 35%.
That drop may feel good, but it’s nothing in comparison to what you can save going offshore. When I took myself and my business overseas, I went from paying 43% to 1%. You’re never going to do that in the US, no matter who is elected president.
But one thing is certain, if Joe Biden is elected, high earners and high-net-worth individuals can expect to pay much more in taxes. If you’re one of those people, it’s important to understand exactly what is in Biden’s tax plan. And that’s true whether you are in the US or you are living overseas as I do to enjoy a freer life.
In this article, I’m going to talk about some of the specific things you’re going to see if Joe Biden gets elected president, what you can do about it, and why it may or may not matter.
$15 MINIMUM WAGE
Let’s jump right in and look at some of the main things on Biden’s agenda and how they would impact you if implemented.
First up, the $15 minimum wage.
If you are employing people, particularly younger entry-level people, this could be an issue. I had a gentleman come to me about a year ago who ran and owned two dozen McDonalds in part of the United States.
I imagine this would hit him.
It’s going to push people to adapt more technologies, to use more automation, which is going to have an impact on the economy for sure. It would put more people out of work.
We kind of got a taste of that during the coronavirus, we saw people being out of work and what that looks like. People get angry.
Who knows what could happen next? Joe Biden could just be the beginning. But overall, $15 minimum wage is going to make it more difficult for you to run your business.
Hiring overseas is one way to circumvent all the new laws on employment. I’ve helped my friends who have physical businesses in the US put part of their staff in countries like Serbia, Armenia, the Philippines, and elsewhere.
Be sure to read our other articles about the benefits of hiring overseas, the best places to hire, how to build a remote team offshore, and ways you could even get a second passport by staffing part of your business in another country.
PAID FAMILY AND SICK LEAVE
Biden wants to introduce or expand on paid family and sick leave. That may or may not be that controversial.
When we used to have some Western Europeans working for us, they would tell me how in Europe you could always get paid by your employer for months to years on end in some cases. As long as you had a doctor’s note, your employer had to pay you because you were sick.
As an employer, I don’t want to pay you your high salary and these ridiculous employment taxes because you’re sick or you made a lifestyle choice.
Maybe that makes me the Evil Grinch, but quite frankly, I don’t expect anyone to pay for my lifestyle choices. I’ll do what I want. I’ll take care of myself. I’ll self insure.
If you want to do something, if you want to have 18 kids, if you want to claim that you’re sick, whatever you want to do, go ahead.
I’m not saying that Joe Biden’s going to make you pay for your employees for the rest of their lives if they have a sniffle, but I’m saying he’s going to introduce paid family and sick leave.
Biden plans to introduce several measures that would make higher education essentially free.
First, he has proposed a program that would pay for two years of community college or other training programs in full (75% federal, 25% state-supported).
Second, he would make public colleges and universities tuition-free for students from families with less than $125,000 of annual income. He would also double the maximum value of Pell grants.
He has also set out plans for student loan forgiveness, new grant programs for underfunded four-year schools, and many, many other measures that are all going to cost a lot of money.
What I find interesting with this whole student loan bubble – which is one of the biggest bubbles out there – is how people have gotten pretty entitled about it. You can watch videos online about why we should just forgive everyone’s student loans.
You could make an argument for that, but here’s the thing: we’ve all been 18 years old. We all know that even those of us who probably acted older than our age and had certain ambitions, we were still 18. We were still immature. We still lacked certain critical decision-making skills.
So, why do we allow 17 and 18-year-olds to go unchecked into taking out hundreds of thousands of dollars in student loans with no requirements on whether they go to school, what they study, or whether the skills they acquire have any marketability?
If you borrow $300,000 to learn how to play the flute or learn German, is that going to be marketable? Are you going to be able to pay this money back? No one’s asked that.
For years, people have been encouraged to go to school, not for free, but to do whatever they want and not to worry about the consequences of that.
I don’t know how long you’ll be able to tell people that they should study engineering because you’re not paying for their Polish Polka History degree. I don’t know if you’re going to be able to say that.
But the bigger issue is that because of the mess of a situation the United States has put itself in with higher education, any plan to fix it is going to cost taxpayers one way or another.
So, even if you were responsible and didn’t take out student loans, you’ll be paying for everyone else’s education, and sooner than later under Joe Biden.
Joe Biden also wants to expand Medicare by making it available at age 55. The progressive wing is angry with him on that because he doesn’t want Medicare for all, but he does want to extend it.
If there’s one thing the US government is really bad at, it’s healthcare.
I’m a very pro-free-market guy, I’m pro-capitalism and pro low tax, but as I have traveled, I’ve seen how some people in a few smaller European countries have been happy with their national healthcare. While it’s not the system that I think is right, at least they’re happy with it.
In the US, no one’s happy with it.
The US has been so inefficient running the healthcare system. The coronavirus mess has definitely exposed all the cracks in the system, which makes it clear that it’s going to be even worse if you extend it.
THE AFFORDABLE CARE ACT
Joe Biden also wants to expand the Affordable Care Act. In practice, this means everything from restoring funding for Planned Parenthood to eliminating tax cuts for pharmaceutical corporations.
What does it mean for expats?
Obviously in the Obama era, if you were an expat you did not have to have an ACA qualifying plan if you were a foreign employee or if you had a foreign company offshore and you were an employee of that company.
If you structured things properly, you did not have to pay into the system or have a policy.
What happens going forward for expats? I’m not sure.
INCREASED CAPITAL GAINS TAX
Let’s get to the taxes. There’s going to be an increased capital gains tax under Joe Biden, no surprise there.
Capital gains are going to be taxed as ordinary income. No more 15% rates. If you have capital gains, they will be subject to as much as Biden’s proposed maximum income tax rate of 39.6%.
Capital gains can be stocks, real estate, or even the sale of a business. We work with a lot of folks who are building businesses that have $2-5 million valuations right now and they are working toward a $50 million valuation. Imagine selling your business for $50 million and the government takes $20 million of that!
Gone, everything you’ve worked so hard for.
In my world, the biggest hit with this capital gains tax hike will be on these people who are selling the businesses that they have built.
And remember, not even the Foreign Earned Income Exclusion will offer you any relief for passive income such as capital gains, even if you earn it overseas.
These tax measures come, in large part, thanks to the Warren Buffetts of the world who have been whining for years about how capital gains tax rates aren’t high enough.
Now, the average person who invests and pays the lower capital gains tax doesn’t depend on those investments as their main income. These folks have businesses or jobs that make more than their investments.
Who knows what this type of law will do to the already-suffering investment market, but Warren Buffett and others have become so ingrained in the psyche of the American left that now it’s just seen as the right thing to do to tax it as regular income because these rich freeloaders are getting their low taxes on capital gains and they’re taking advantage of the system.
Warren Buffet could write a check to the Treasury, but he chooses not to. There’s an option right on the IRS website to send in a check if you feel patriotic. If he thinks he’s not paying enough, he’s welcome to.
But he thinks that because all his money comes from investment income that, therefore, everyone else should pay more so he can feel better. And that’s exactly what you’ll get if Joe Biden becomes president.
Biden also plans to raise the corporate tax rate, which may or may not affect every small business owner. Businesses are going to be subject to a minimum tax rate of 28% if they aren’t paying enough.
He says he won’t make the rates as high as they were in 2017, but if you remember before the Tax Cuts and Jobs Act, the United States had the highest corporate tax rates on Planet Earth. Even socialist countries had lower taxes!
Everyone has been lowering their corporate tax rate. Even the current 21% rate is not great. You can go to a lot of countries where corporate tax rates are zero or in the single digits.
Countries like Barbados just slashed their tax rates into the single digits for everyone. You have countries in Europe and elsewhere with 9-12% tax rates. You have countries that have 15-20% rates but you pay when you choose. You can reinvest the money and get the benefit of it until you decide to take it out.
This is why I talk about going where you’re treated best. If you run a business that’s portable, there’s no reason your business should be in the United States. There’s no reason you should be in the United States.
Under the Trump administration, if you run a normal business totally in the US, you can get your tax rates lowered. But they’re going to go back up under Biden. To what levels, we don’t know, but they’ll probably go back to being some of the highest in the world.
If you aren’t quite ready to move your business offshore, there are still ways to benefit by taking baby steps into the offshore world.
Biden also wants to pay for infrastructure with new taxes on corporations and the wealthy (of course) because they clearly don’t pay enough already.
Here’s the issue with building the infrastructure by taxing the rich: everyone benefits even though most people aren’t paying anything for it.
If you go to a lot of countries in Europe, taxes are certainly very high, but they often have as little as two different progressive tax brackets. And the lower bracket might be 20-25% which means everyone is paying something. Yes, there are exemptions – your first 10,000 euros may be free – but everyone is paying something.
In the US, half the country pays nothing.
And yet, if you’re wealthy… even if you’re not that wealthy and you’re just a six-figure income earner in LA or New York City where that money doesn’t go nearly as far as it would in Oklahoma, you are considered rich by them.
They don’t differentiate.
You’re just the “evil rich” because you make more money than the average Joe.
And since you are the “evil rich”, they don’t feel bad at all raising your taxes to pay for infrastructure. Why? Because it’s politically possible.
What astounds me is how I go to Dubai, Malaysia, or Tbilisi, Georgia and I drive around on roads that are much better than any you find in many parts of the US.
I have people that I work with who will go back to where they’re from in the US and wonder at how the roads in this former Soviet republic where I live and do my business are better than they are in Milwaukee.
The taxes in these “third-world countries” are far lower and yet they’re getting much better roads. How does that work?
Joe Biden is not going to apply a wealth tax like some of the more liberal voices out there have pushed for, but he does want to increase taxes on the wealthiest people in the United States.
This comes not only in the form of returning to the maximum tax bracket of 39.6% but also through changes to Social Security taxes.
Under Biden’s tax plan, incomes over $400,000 would be subject to Social Security tax on the overage. This means you will be taxed at a rate of 12.4% from $400,000 up to infinity.
Right now, you pay Social Security on the first roughly $137,000 of income. That amount goes up a little bit every year, but it’s a small increase to account for inflation.
With the new tax law, you won’t pay the Social Security tax on income between $137,000 and $400,000, but anything beyond that is fair game. They’re basically going to take your money and you’re never going to get it back. You’re going to pay that 12.4% rate no matter how much you make.
So, if you were to make a million dollars, you will be paying that 12.4% rate on $600,000 of income, which equates to almost $75,000 in extra taxes – money that you’ll never see again.
The problem with this is it might not even be deductible. Under Biden’s plan, deductions are going to be capped at 28 percent of value. So, you’re going to be losing out on the difference in tax deductions and you’re not going to have as much deductibility.
And, of course, that’s on top of what you’re paying in California, New York, whatever city you live in, your county, and whatever you pay in property taxes. Remember, your federal taxes are only a part of what you have to give away to the government.
Even under the current top tax bracket which is a little bit lower under Trump, you could be paying as much as 54% of your income in taxes right now if you are an entrepreneur in California.
You’re already working for 46 cents to the dollar and Biden wants to make it worse.
A Note On Offshore Taxes
Under the recent Trump Tax Reform, a tax measure entitled GILTI was introduced that charges a 10.5% tax on all US-owned businesses that are incorporated overseas. Joe Biden wants to double the GILTI tax rate to 21%.
This means that if you are already offshore, you could potentially pay more in tax than you do right now. So, not only will Biden raise taxes domestically but you will also have fewer options if you go offshore.
Now, offshore will still be substantially cheaper than domestic but the price of everything is going to continue to go up. Compliance measures may also go up.
HANDOUTS AND REGULATIONS
There are a number of other handouts and regulations that Biden is looking to implement.
For instance, he wants to make business more difficult for things like Internet companies and others by putting more liability onto businesses.
This will likely take the shape of more onerous regulations, including things like privacy acts, which in and of themselves may be well-meaning and have some benefits, but it’s more regulations for your business to follow.
Also, despite the fact that the country is tens of trillions of dollars in debt, they’re going to start giving away more free stuff.
Biden wants to increase the child tax credit to $8,000. Many families who will get that are already paying zero in tax.
Retired citizens with part-time jobs will get free money from the government, too.
And they want to put more people on healthcare, pay farmers more subsidies to be climate-friendly, and expand the military budget.
Essentially, the Biden government will continue to add to the national debt by giving money to all the people who vote for him, even though half those people don’t even pay federal taxes right now.
And all this means that taxes on the wealthy will continue to go up. How else do you think they are going to pay for this?
You may also see a decrease in personal freedoms. For example, you will not be able to send your kids to certain charter schools going forward, among other things.
That’s what will happen if Joe Biden becomes president.
“The Most Important Election of Our Time”
As long as I can remember, every election has been “the most important election of our time.” That’s what I heard over and over again watching politics growing up. And when you hear it enough, you start believing it.
But it turns out that no single election is going to dramatically change your world forever. Will it have consequences? Yes. But no single individual – even when granted the powers of the US presidency – is going to completely alter the fabric of society.
But that’s how a lot of people think.
Pre-Trump, we got a lot of people who would contact us just to complain about how the country was going down the tubes. They had no intention of actually hiring us. They just wanted to vent about how Obama was ruining the economy.
But did they do anything about it? No.
When Trump won the election, suddenly the country went from going down the tubes to being the best country on Earth again. And we saw a slight decrease in the number of people who would contact us who had no intention of hiring us.
But did that much really change?
The United States still has dwindling personal freedoms, taxes are still pretty high, there are still many more regulations for US businesses than there are overseas, and there are still a lot more headaches in terms of hiring people in the US.
The list could go on.
If you’re of the mindset that one person is going to change the entire direction of the country, then I probably can’t help you.
I’m an entrepreneur. I’m not in the habit of letting other people determine my outcomes. And I’m not about to let an election determine my future.
No one person is going to make a substantial difference in my life unless that person is me.
If you thought that Trump was going to solve all your problems and suddenly you were going to live a tax-free life and everything was going to be perfect, I hope you realize now that that simply isn’t the case.
It’s Only a Matter of Time
Joe Biden is putting forward this tax plan in 2020, but whether he wins this year or whether someone on the left wins in 2024, this is the kind of stuff they want to do.
But forget what Joe’s proposing, how are they going to pay for the stimulus packages and all the other measures they’ve taken in response to COVID-19?
How are they going to pay for the handouts and everyone being on unemployment for the rest of their lives?
One way or another, it’s only a matter of time before taxes go up in the United States.
The US has been on that trajectory for decades. Over one hundred years ago, the US went to great lengths to amend the constitution just to introduce the very first income tax at a rate of 3%. The rate is now thirteen times that!
These days, organizations like the AOC want to introduce a wealth tax on anyone with $50 million or more. Once they start, they’ll realize that $50 million won’t be enough. They won’t be able to raise enough money from that, so then they’ll go down to $20 million, then $10 million, then it will creep down further and further.
Once you have a wealth tax, you have a wealth tax.
We can discuss whether those policies are good or bad, but if you’re wealthy, your taxes are simply going to go up and politicians are going to eventually come for your money, whether it’s Joe Biden now or someone else in the future.
You can only kick the can down the road for so long.
Invest In An Insurance Plan Now
This is why having an offshore insurance policy is a good idea. If you can create an active Plan A and get out now before they come up with the next hair-brained scheme, go for it. But what I’ve learned in this year of chaos is that even high-net-worth individuals who don’t necessarily want to leave their home country right now still want to be prepared.
People have commented in the past that there is no way that Joe Biden is going to win.
Even so, when I started driving, I figured there was no way that I was going to drive my car off the side of the road, but I still bought car insurance.
Whether or not Joe Biden wins in 2020, you need an insurance policy, a contingency plan for any and all future circumstances.
When I left the United States, I was frustrated with a number of things, I didn’t feel like I belonged there, and had my reasons for leaving. But what I discovered, after the fact is that I saved myself from whatever new stuff they wanted to come up with after I left.
I never considered that when I was leaving, but that is the case.
But even if you’re not ready to leave, there are numerous different strategies that we talk about here at Nomad Capitalist that act as insurance policies against the worst-case scenario.
Look at your options.
It can be as simple as protecting some of your assets overseas, investing in foreign markets, buying non-reportable offshore assets like precious metals and real estate, moving part or all of your business overseas, and potentially moving yourself to another country, having a second passport, or any number of other strategies.
Start looking at setting those things up now because taxes are only going to go up. That’s what we’re here to help you do.
Go Where You’re Treated Best
Now, as I said, I have opted out of the system. I opted out for years by not living in the United States. And I opted out permanently by expatriating from the United States.
None of this really makes a difference to me anymore.
I don’t care if Joe Biden gets elected. I don’t care if Bernie Sanders gets elected. (Although, if Bernie Sanders had won, more people would have been coming to me and hiring me to get out of the US. But that’s not going to happen.)
What I’ve always said is if you’re looking for more freedom, go where there’s more freedom. If you think the government is taking away your ability to do something, find a place where what you want to do is allowed.
If you think taxes are too high, you’re never going to get a truly low tax rate in the United States or any big Western country like it by voting. They have too much debt and too many problems to ever truly achieve significant tax reform.
You’ve got to go where tax rates are lower.
This is what I mean when I say, “Go where you’re treated best.”
As a lifelong business owner, I don’t expect anyone else to make my life better. Some people benefited under Trump, tax rates went down and there were more opportunities to invest in certain things.
Joe Biden would certainly roll some of that back, but you’re never going to get the same benefits in the United States that you would get if you went offshore and country shopped.
That, to me, is a big takeaway from all of this. You don’t have to worry whether Trump or Biden wins when you can just leave and find a place where you are welcome.
The United States is a country that nibbles around the edges. Your taxes go down 5% then they go up 5%. There isn’t any real change.
If you’re the seven- or eight-figure entrepreneur we talk to and you’re making a million bucks, it might cost you $50,000 more a year if Joe Biden gets elected. But in all honesty, you’re probably not going to notice that extra $50k a year.
It may make a small difference – paying $450,000 instead of $400,000 may be painful – but the real issue is the first $400,000 that you are already paying.
Saving more requires a bigger change.
There are places where you can go where you’re treated best.
I’m not pro-Trump or anti-Trump. I’m not pro-Biden. I’m very agnostic about the whole situation.
What all this really is from my perspective is a kick in the butt. It’s just a little bit more painful for you if Joe Biden gets elected. It’s just a little more inspiration to go where you’re treated best and look into the stuff that I’ve been talking about here for years.
What I want is for you to find the motivation to go where you’re treated best. If paying extra tax, having more regulations, and having some of your freedoms taken away is the price that motivates you to do that, then I’m all for it – because I want you to go where you’re treated best.
These changes, whatever they are, might be just the thing that makes you finally take the next step forward.