President-elect Joe Biden has proposed tax hikes for wealthier taxpayers and corporations. Opinions vary on which could hit hardest.

According to Crowe LLP, proposals of the president-elect for individual taxes include raising the top marginal tax rate 2.6% for annual income exceeding $400,000; removing the rate preference for capital gains and qualified dividends for income exceeding $1 million; and keeping the 3.8% net investment income tax. Biden also proposes raising the corporate tax.

The Biden proposals that would likely impact the wealthy most are the estate tax changes, “which would eliminate the step up in basis at death, immediately lower the estate and gift tax exemption, and raise the estate tax rate, and the increase in the top individual rate combined with the removal of the preference for capital gains and qualified dividends,” said Gary Fox, managing partner of the Crowe LLP tax services group and the office managing partner in South Bend, Ind.

“Given that some of the worst effects of the pandemic on the economy may be felt this winter just as the next president and Congress take office, it’s difficult to envision a majority in Congress agreeing to immediately raise taxes on either individuals or businesses,” he said. “In addition, it’s unlikely that in 2021 Democrats would broadly support legislation to raise taxes given that in 2022 they will be defending against the Republicans gaining a majority in the House.”

Others feel that even Republican-controlled Senate may eventually have to address deficits worsened by tax reform’s cuts and pandemic-relief measures.

Taxing capital gains and qualified dividends will be the “big hit” to the wealthy, said Dan Henn, a CPA in Rockledge, Fla. The corporate rate hike may cost jobs—though might work better if phased in over years, Henn added.

“The most important Biden point is that he wants to increase the FICA tax on those earning over $400,000 a year,” added Bruce Primeau, a CPA/CFP at Summit Wealth Advocates in Prior Lake, Minn. “I’m glad a president is trying to fix the inevitable issues with the Social Security system. I’m not in agreement with what could be an unreasonable increase in the amount of FICA tax being paid.”

Primeau also said he finds the proposed near-doubling in capital gain and qualified dividend tax rates “absurd.”

“It seems as though the top few percent, in terms of income, are going to foot the bill for most everything,” he said, adding that the government continues to have “a spending problem.”

Many wealthy taxpayers are concerned about Biden’s call to return the estate tax rules to 2009 levels, said James McGrory, CPA and shareholder at Drucker & Scaccetti in Philadelphia. This would result in the current 40% top rate estate, gift and generation-skipping tax to be increased to a 45% top rate, for instance, and the lifetime exclusion amount ($11.58 million per taxpayer) to be reduced to $3.5 million per taxpayer, indexed for inflation.

McGrory’s conversations with high-net-worth clients and their financial representatives remind him “of the fiscal cliff issue of 2012, when there was tremendous concern that the lifetime exclusion amount would drop to $1 million from the $5.12 million amount in effect at that time,” he said. “The supercharged lifetime exclusion amount introduced by the Tax Cuts and Jobs Act has encouraged many clients to initiate wealth transfers during their lifetimes. If President-elect Biden’s proposal to reduce the lifetime exclusion is enacted, I can realistically see lifetime gifting by wealthy clients not being as robust.”

Gifting strategies should look forward, too. “Biden’s proposed increase in the long-term capital gain and qualified dividends tax rates ... could encourage taxpayers to make gifts of highly appreciated assets outright to charity to avoid the capital gains tax entirely or they may consider a charitable remainder trust,” said Stephanie Buckley, senior regional fiduciary manager for philanthropic services at Wells Fargo Private Bank. “Reduction of the lifetime gift and estate tax exemption amount could encourage individuals with large estates to gift more to charity through the estate to save on taxes.”