By Pierre G Villere
By the time you read this, we will be days away from electing our next president. And believe me, I learned in the 2016 election results that pollsters are missing their election calls more and more these days, as voters become harder to predict, and voter turnout is impossible to gauge.
Of course, we all remember the upset of the 2016 election, when Trump won the Electoral College in a stunning upset over Hillary Clinton.
The pollsters had it so wrong, she didn’t even prepare a concession speech, and did not appear before her supporters that night because of the outcome that left her and the entire campaign staff completely shell-shocked.
Fast forward to the Louisiana gubernatorial election last year, which happens to be my home state. We had a Democratic incumbent in a ruby red state who won four years earlier against a Republican weighed down by a messy sex scandal.
This time, the polls all said the Republican candidate was a shoo-in, especially since Trump campaigned for him, but he lost against the Democratic incumbent by a fair amount, another big miss by the pollsters. Given these misses, I have lost confidence in their ability to measure the outcome of a campaign.
Tax Changes. But the election will come and go, and the biggest impact will be a rather dramatic change in our tax structure in the event of a Democratic win.
Note that I didn’t say a Biden win; a Senate majority retained by the Republicans would keep any new tax legislation in check, and much of what Biden is proposing would surely have an uphill climb.
Overall, Biden’s tax plan is simple: increase taxes on corporations and the wealthiest Americans. His goal would keep the cuts for middle-income households but raise taxes sharply on corporations and households making more than $400,000 a year.
From a corporate tax standpoint, Trump ran on a tax cut in 2016, and he and the Republican-controlled Congress delivered in 2017 when they reduced the corporate tax rate to 21% from 35% and made it easier for companies to deduct capital-investment costs and bring home their foreign profits.
The key thing to remember here is that he had a majority in both houses of Congress, but he lost the House in the 2018 midterms.
Cuts Too Steep. Biden says that law cut taxes too steeply, so he would raise the corporate tax rate to 28%, impose a new minimum tax on U.S. companies, and raise taxes on the foreign income of many U.S.-based multinationals.
But his plan also targets high-income households, where he proposes a top individual tax rate of 39.6%, up from 37%, as well as increases to the Social Security payroll tax.
He would also repeal a 20% deduction for income from pass-through businesses as it applies to high-income households and impose new limits on itemized deductions.
He offers certain tax cuts too, including a proposal to repeal the $10,000 cap on the state and local tax deduction.
But notably, Republicans have long supported cuts in capital-gains taxes as a boon for the economy, but they didn’t change those rules in the 2017 tax law. Now Trump proposes to cut capital-gains taxes, driving the top rate down to 15% or 18.8% from 23.8%.
The top capital-gains rate would nearly double under Biden, to 39.6%, but that rate would apply only to households with income exceeding $1 million.
What is worrisome about this specific proposal is that it does not exclude the gain from the sale of a family business, therefore almost doubling the amount a producer would have to pay upon the sale of the family aggregates business. We will be watching carefully and hoping for the best outcome in tax reform for our industry.
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers and acquisitions. He has a career spanning almost five decades, and volunteers his time to educate the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at [email protected]. Follow him on Twitter @allenvillere.