The Biden tax would likely lead companies to do away with stock-based compensation, which is a useful tool for firms to align employee incentives with the firm’s performance as measured by the stock price, Watson said.

The Biden proposal would affect not only stock-based compensation—"which is generally a good idea”—but a number of other corporate tax incentives, said Joseph Darby, a veteran tax attorney in Boston.

“Essentially, the Biden administration and Congress are saying they don’t want corporations to have incentives to invest in stock options, municipal bonds, research and development and low-income housing. Instead of just taking away the incentives, they’re going to add another tax on, to make those deductions useless,” Darby said.

By taxing the interest on municipal bonds, which was made a deduction in 2017, the tax would actually increase the burden on state and local governments that issue the bonds, he said.

“Biden’s proposed 15% tax is an overlay. By adding back in all the corporate incentives and deductions, it penalizes investment,” Darby added.

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