Higher Taxes For Wealthy A Stark Possibility In Wake of Virus

As the COVID-19 crisis continues, many states are scrambling to repair tax revenues. This raises the possibility of increased taxes, and some think the familiar call to tax the wealthy most will gain new momentum. 

States have already began generating ideas on creating or increasing taxes. Wealthy taxpayers who spend more on goods and services are a likely to be hit harder than the average taxpayer. 

According to Steve Wittenberg, director of legacy planning at SEI Private Wealth Management, “The situation is highly speculative and magnified because of an election year.” Wittenberg also stated, “There are only two options: Raise taxes or control the budget by cutting other expenses. Raising taxes on the wealthy may provide for the biggest bang.”

The question is whether more taxes are the cure for plunging revenues. Given the deep losses in government revenues and extensive increase in unemployment benefits and tax relief, raising taxes on wealthier taxpayers becomes a real possibility. 

However, CPA Jared Feldman, stated that history has not always supported the notion that the federal government will raise taxes when they need more money. Feldman added that there are ways of raising taxes without raising rates. 

For example, even though there were no changes in the tax rates in the CARES Act, some provisions decreased the tax burden for some wealthy taxpayers that own businesses. 

See Jeff Stimpson, Higher Taxes For Wealthy A Stark Possibility In Wake of Virus, Financial Advisor Magazine, June 15, 2020. 

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.