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Tags: Biden Administration | biden | cabinet | taxes | capital gains

Biden's Cabinet Could Delay Tax Bills

antony blinken stands in front of american flags
Secretary of State Antony Blinken departs after giving a press conference in the Jordanian capital Amman, on May 26, 2021. (ALEX BRANDON/POOL/AFP via Getty Images)
 

By    |   Friday, 04 June 2021 09:33 AM

Although President Joe Biden's proposed changes to tax law could cause members of his cabinet to pay more capital-gains taxes, they could delay paying these taxes thanks to a lesser-known federal provision, The Wall Street Journal reports.

Ethics policies for top government officials frequently force cabinet members to convert assets that could cause a conflict of interest into low-risk assets, such as treasuries or mutual funds, and are given certificates of divestiture that they can use to avoid paying capital-gains taxes at that time.

Biden's plan would greatly increase capital-gains taxes, from 23.8% to 43.4% if passed, which has prompted many of his cabinet officials to start selling assets in order to avoid paying the higher rate, but if those assets increase in value that would cause their taxes to increase.

Secretary of State Antony Blinken has already sold hundreds of shares of Oracle, Berkshire Hathaway, Apple, Facebook, and 3,700 shares of Ally Financial Inc., as well as the one-third of the consulting firm WestExec Advisers LLC that he owned. Defense Secretary Lloyd Austin sold tens of thousands of shares of Tenet Healthcare Corp., whose board he sits on, for anywhere from $1 million to $5 million.

The Journal notes that Energy Secretary Jennifer Granholm was granted a divestiture certificate in May for about 240,000 shares of the electric-vehicle manufacturer Proterra, shares that had raised concerns among Republicans after Biden conducted a virtual tour of the company's facilities last month.

"Energy Secretary Granholm held millions of dollars of investments in an electric bus company. During her nomination hearing, she committed to the Senate that she would avoid the appearance of any conflicts of interest," Sen. John Barrasso, R-Wyo., who chairs the Senate Energy and Natural Resources Committee, said after the announcement that Granholm had sold the stock.

"While she still owned these stocks, Secretary Granholm actively promoted electric vehicles and electric vehicle batteries," he said. "President Biden took a virtual tour of the company and Vice President Harris toured one of its partner companies."

Virginia Canter, an expert on certificates of divestitures at the left-leaning ethics watchdog Citizens for Responsibility and Ethics in Washington, told Fox News that when an official defers capital-gains taxes on divested assets, they incur those taxes "when they sell the new investment, not the original one.”

She added that "The idea is that they're deferring it. And, the fact is, sometimes you're selling in a down market."

Canter noted that "during the Obama administration, nominees came in and they could've been selling at a loss, so there's no need for capital gain in the deferral. So I think it would tend to benefit somebody who had been in a company for a long, long time and had built up a lot of stock through executive compensation.” 

Canter and the Journal both note that former Treasury Secretary Hank Paulson eventually had to pay tens of millions in taxes after selling about half a billion worth of stock in Goldman Sachs, but Canter added that this allowed Paulson to "diversify his portfolio," which she described as "an ancillary benefit."

She said, "Since you're limiting your subsequent investment, you may also not be maximizing your profit.”

This means "it's hard to say if you're a clear winner or not just depending whether you come into the government, whether your selling would actually incur capital gains, whether it will allow you to diversity a portfolio of holdings that would otherwise be very concentrated."

© 2021 Newsmax. All rights reserved.


Politics
Although President Joe Biden's proposed changes to tax law could cause members of his cabinet to pay more capital-gains taxes, they could delay paying these taxes thanks to a lesser-known federal provision...
biden, cabinet, taxes, capital gains
574
2021-33-04
Friday, 04 June 2021 09:33 AM
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