Displaying items by tag: biden

Infrastructure investment has changed vastly in the last few years. Not only is the sector at...see the full story here

Published in Bonds: Munis

(New York)

The municipal bond demand has spiked to a near all-time high. Prices are indicative of that, but…see the full story on our partner Magnifi’s site

Published in Bonds: Munis
Thursday, 17 June 2021 17:42

Biden’s Newest Tax Shock for Your Clients


Any advisor has likely read about Biden’s new tax proposals on the “wealthy”. We use quotes on that term because many of them would also apply to middle class families. One such policy which would hurt most heirs is Biden’s plan for taxing family businesses. As most know, Biden is planning to tax inherited assets on their original basis (not the basis at death). This will cause a big spike in taxes for many, especially in the case of inheriting businesses, as the basis of most businesses is zero dollars, since many are founded by parents and left to children. Consider an example of a business which Ernst & Young presented in a report. “…someone started a wine distribution company two decades ago. The business initially had no market value. When that founder dies in 2025, his daughter inherits the company, now worth $550,000 with annual revenues of $40,000.

Under current law, the company’s value for tax purposes would be “stepped up” to that new amount, and the daughter wouldn’t owe capital gains taxes on her inheritance. Next, say she sells the distributor five years later for $710,000, when its annual income has grown to $50,000 and she’s ready to cash out. Under current law, she would owe the 23.8% capital gains tax on its appreciation under her wing, or more than $38,000 ($710,000-$550,000 = $160,000; $160,000 x .238 = $38,080).

Under Biden’s proposal, she wouldn’t owe tax upon inheriting and running the business her father started — but neither would it get a stepped-up basis. Which means that when she eventually sells the company for $710,000, she would owe capital gains tax, at Biden’s higher rate, on its total gains since it started from zero. That’s a tax bill of more than $281,000 ($710,000 x .396 = $281,160). Under the White House’s plan, her tax bill is more than seven times higher. She can pay it over 15 years, at more than $18,700 a year, but may not have the cash from its sales.”

FINSUM: This is obviously a massive hike and a terrible burden for all but the wealthiest individuals. It is likely to cause debt for many, and a resulting fire sale in small businesses.

Published in Wealth Management

Infrastructure investment has changed vastly in the last few years. Not only is the sector at the epicenter of Biden’s stimulus packages, but “infrastructure” has evolved beyond the traditional view of buildings and transportation. Infrastructure investment now refers not only to road and rail—the literal backbone of 20th century development—but also to emerging global themes like decarbonization, clean water, and digital transformation. Further, infrastructure investment has expanded from municipal bonds to equities and other fixed income solutions. As in the past, there continue to be compelling reasons why an allocation in infrastructure makes sense for today’s portfolios:
• Consistent and stable return profile
• Strong portfolio diversifier.
• Focus on essential assets.

Why Now?

President Biden has put America’s aging infrastructure at the center of his presidency and there is a major infrastructure bill moving through Congress which we believe would provide unprecedented opportunity for investment in the sector.
But what is the best way to invest in infrastructure?

Essentially there are three routes. First, through globally listed infrastructure, which is currently trading very favorably levels*. For example, P/E ratios for infrastructure equity investments are well below those of other comparable investment profiles. Take a look at the MainStay CBRE Global Infrastructure Fund (VCRIX), a Lipper Award winning fund, to learn more.

Second, tax exempt muni bonds can be a strong and traditional option. Three-quarters of all infrastructure funding is provided by muni bonds, and the sector has generally had fewer credit downgrades than the bond market as a whole, largely because of the “essentiality” of the services that municipal issuers provide. For example, the provision of water, power, and education have not been greatly affected by recessions. An option for infrastructure investment via tax exempt muni bonds consider the IQ MacKay Municipal Intermediate ETF (MMIT), a highly rated fund by Morningstar.

Third, taxable muni bonds are an increasingly popular option which fulfil an important role in the ecosystem. Their issuance has surged since their effective inception in 2008 via Build American Bonds after the global financial crisis. They consist of largely the same issuers, but their taxable status means they can be utilized in areas where conventional muni bonds largely have not, such as qualified plans, pensions, endowments, and foundations. Check out the MainStay MacKay U.S. Infrastructure Bond Fund (MGOIX).

*Source: CBRE Clarion as of 3/31/21
All investments are subject to market risk, including possible loss of principal. Diversification does not ensure a profit or protect against a loss in a declining market.

Click on the fund name for the most current fund page, which includes the prospectus, investment objectives, performance, risk, and other important information. Returns represent past performance, which is no guarantee of future results. Current performance may be lower or higher. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost.

Please ask your clients to consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus and, if available, the summary prospectus, contain this and other information about the fund and can be obtained by contacting you, the financial professional. Instruct your clients to read the prospectus or summary prospectus carefully before investing.

“New York Life Investments” is both a service mark, and the common trade name, of certain investment advisors affiliated with New York Life Insurance Company.



N.B. This is sponsored content, not FINSUM editorial.

Published in Eq: Growth


President Biden has offered to abandon his original 28% corporate tax rate proposal to pay for his stimulus and infrastructure packages…see the full story on our partner Magnifi’s site

Published in Wealth Management
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