Category Archives: News / Updates

Navigating the Political Landscape: Kamala Harris’s Tax Policies

The political landscape in the United States has recently witnessed significant developments, including President Biden's abrupt withdrawal from the presidential race, the Democratic leaders' selection of Kamala Harris as his replacement, and an assassination attempt on former President Trump. As Harris emerges as the most likely Democratic nominee, it is crucial to understand her stance on key issues, particularly taxation. While we await her official campaign promises, analyzing her past proposals and comments provides valuable insights into her potential tax policies. Here’s a summary of what we know so far and the key questions surrounding her tax stance.

Corporate Tax Rate

The Tax Cuts and Jobs Act of 2017 reduced the corporate tax rate from 35% to 21%. Harris has previously suggested returning the rate to 35%. The direction she chooses could significantly impact the business community and economic landscape.

Introduction of Financial Transaction Tax

During her 2020 presidential campaign, Harris proposed a financial transaction tax (FTT) to fund healthcare coverage. This included taxes on stock, bond, and derivative trades. Although it is uncertain if she will reintroduce this idea, it highlights her approach to leveraging taxes for broad social programs.

Harris’ Other Historical Tax Proposals

Harris has proposed various tax measures in the past, which provide a glimpse into her potential policy directions:

  • Top Marginal Income Tax Rate: Increase top marginal tax rate for individuals to 39.6% from 34%.
  • Income-Based Premium: A 4% tax on households making over $100,000 for Medicare for All (including all undocumented migrants).
  • Repeal of Long Term Capital Gains Tax Rate: Raise rates to align with ordinary income tax rates. Appeal the current preferred long term capital gains tax rate of 20%.
  • Estate Tax: Expansion of the current estate tax.
  • Financial Transaction Tax: 0.2% on stock trades, 0.1% on bond trades, and 0.002% on derivative transactions.

Kamala Harris’s tax policy platform is anticipated to largely reflect her past proposals.  As more details emerge, it will be essential to monitor how her policies evolve and their implications for businesses and individuals.

Stay informed and prepared as the political landscape shifts.

California Senate Bills 167 and 175

California Senate Bill 167, signed into law on June 27, 2024, introduces tax changes aimed at addressing the 2024-2025 budget shortfall of $27.6 billion and the projected $28.4 billion deficit for 2025-2026. This budget shortfall is largely due to two significant measures: Starting January 1, 2024, California became the first state to offer health insurance to all undocumented immigrants through Medi-Cal, California’s version of the federal Medicaid program for low-income individuals, regardless of age. Additionally, Governor Gavin Newsom signed a suite of bills to address the homelessness crisis and enhance California’s response to people suffering from mental health issues on the streets, as part of his $22 billion housing affordability and homelessness package.

Senate Bill 167 suspends net operating losses (NOLs) from January 1, 2024, to January 1, 2027, for both corporate and personal income taxes, with exemptions for taxpayers with net business income or modified adjusted income below $1 million. The existing 20-year carryforward period for NOLs is extended by up to three years if the losses cannot be used due to the suspension.

Additionally, Senate Bill 167 limits the use of business credits to $5 million annually from January 1, 2024, to January 1, 2027. This limit applies to both the Corporation and Personal Income Tax laws, though certain personal income tax credits and the low-income housing credit are excluded. The carryover periods for these credits are extended by the number of years they are disallowed.

Senate Bill 175, pending signature, provides relief for businesses affected by the measures in Senate Bill 167. It offers the potential for an early sunset of the NOL suspension and credit limitation if the Director of Finance determines by May 14, 2025, or 2026, that the General Fund money is sufficient without these revenue measures.

Hospitality Industry Tip Income and Potential Tax Changes (Korean ver.)

서비스 산업에서 팁은 종사자들의 소득의 상당 부분을 차지한다. 레스토랑과 바에서 일하는 서버와 바텐더는 소득의 50-70%를 팁에서 얻으며, 호텔 직원인 벨보이와 하우스키퍼는 약 10-20%를, 발레 파킹 직원과 스파 직원 등은 20-40%의 수입을 팁으로 받는다.

2024년 기준으로 서비스 산업에는 약 1,680만 명의 사람들이 고용되어 있으며, 수백만 명이 팁에 의존하고 있다. 여기에는 250만 명의 웨이터와 웨이트리스, 거의 50만 명의 바텐더가 포함된다. 1965년부터 IRS는 팁을 과세 대상으로 삼아, 직원들이 이를 소득으로 보고하고 고용주가 세금을 원천 징수하도록 요구해 왔다.

최근 공화당의 유력 대선 후보인 도널드 트럼프 전 대통령은 2024년 6월 8일 네바다에서 열린 집회에서, 당선될 경우 서비스 산업 종사자들의 팁 소득을 비과세로 전환하는 연방 법률 변경을 약속했다. 이러한 변화는 서비스 업에 종사하는 많은 사람들에게 세금 부담에서 벗어나도록 도와줄 수 있으며, 물가 상승으로 인한 경제적 어려움을 완화시킬 수 있을 것으로 예상된다. 트럼프가 다시 백악관에 입성할지 여부는 아직 알 수 없지만, 만약 그렇게 된다면 2017년 세금 감면에 포함된 많은 세금 규정들이 연장될 것으로 예상된다. 또한, 경제를 활성화하기 위해 많은 다른 세금 인센티브들이 도입될 것으로 보인다.

하지만·위 공약은 트럼프의 백악관 입성과 공화당의 상·하원석 다수 확보가 필요하기에 일각에서는 위 공약의 이행 가능성 여부에 대한 의구심이 일고 있다. 게다가, 세금 법률에 대한 유일한 권한은 의회가 가지고 있기 때문에 트럼프는 줄어든 세수의 균형을 맞추기 위한 보완 조항을 도입해야 할 것이다.

Hospitality Industry Tip Income and Potential Tax Changes

In the hospitality industry, tips form a significant part of workers' income, with servers and bartenders in restaurants and bars earning 50-70% of their income from tips. Hotel staff, such as bellhops and housekeepers, receive a smaller portion, around 10-20%, while other roles like valet attendants and spa staff see tips contributing 20-40%.

As of 2024, the hospitality sector employs about 16.8 million people in the U.S., with millions relying on tips, including 2.5 million waiters and waitresses and nearly half a million bartenders. Since 1965, the IRS has taxed tips, requiring employees to report them as income and employers to withhold taxes.

Recently, former President Donald Trump, a presumptive presidential candidate of the Republican Party, promised during a rally in Nevada on June 8, 2024, to change federal laws to exempt tip income from taxes for hospitality workers if elected. This potential change could relieve many in the sector from tax burdens and mitigate economic hardships from rising prices. While it is too soon to assume that Trump will reclaim the White House, if he does, taxpayers can expect to see many of the tax provisions included in the 2017 tax cuts extended. Additionally, many other tax incentives would likely be introduced to revitalize the economy.

However, some are skeptical that such a promise would be fulfilled unless Trump reclaims the White House and the Republicans secure a majority in both the Senate and the House.  Additionally, Trump would need to introduce offsetting provisions to balance the budget, as Congress holds the sole authority over tax legislation.