So Joe Biden is officially planning on raising taxes on people who do indeed make less than four hundred thousand dollars, which is in contrast to his original campaign promise to not increase taxes on people making under four hundred thousand dollars now. Joe Biden's plan initially will seem like that is not true he's only increasing taxes on people making over 400k, but this information just out actually goes a lot deeper than that. Let's take a look at this in detail. So Joe Biden is suggesting increasing the contribution of Medicare taxes from 3.8 percent on income above 400k to five percent.

Now initially. first things first, we look at this and we go okay. Got it. So more Medicare taxes for people making over four hundred thousand dollars.

So if you make over 400k, only the amount over 400k gets an additional 1.2 percent tax, right? So if you make four hundred twenty thousand dollars, twenty thousand times 1.2 percent means you're paying an extra two hundred forty dollars on every twenty thousand dollars. Over four hundred thousand dollars. That seems fair, right? I Mean yes, after all, that's Joe Biden's idea is that hey, you know we just want people to pay their fair share even though those in the top one percent pay about forty percent of all of the government's revenue. And some people, especially, uh, those making over four hundred thousand dollars, pay somewhere between forty four to fifty five percent of taxes depending on what state they live in.

Which means, in some cases, you're paying more than half of, uh, your entire earned income to the government. Let's just focus on where does this actually increase taxes for people making less than four hundred thousand dollars? Because that's pretty important, right? And after all, why is Joe Biden thinking about making these changes? Well, mostly why Joe Biden is thinking about making these changes is because we if we jump into the U.S Treasury's sort of guidance on where we're going to be if we follow this unsustainable fiscal path of basically spending the way we are today on programs like Medicaid Medicare Social Security and defense spending. Well, if we stay on this path, eventually the amount of Interest we're going to pay as a percentage of GDP is going to potentially go from maybe just paying three percent interest to potentially 25 interest, basically burying Us in so much debt because we're spending too much money as a country. The Treasury Department themselves is saying we're basically screwed if we stay on this path, and the only way to fix that path is basically by contributing less or taxing more right? Or just spending less money via like austerity, which is kind of like what the European Union did.

So if we jump over to this, what's really remarkable is over here. This is the loophole. It's probably going to hit limitations from Republicans I think Republicans are going to push back really, really hard on this, especially since they control the house. This is part of a budget negotiation though.

it's going to come up with the negotiations of the debt limit personally. I Think this is probably a political Ploy This is probably Joe Biden Throwing this in here purposefully to piss off Republicans To make Republicans go. Okay, Okay, okay, we'll We'll let you tax that one and a half percent more on people making more than four hundred thousand dollars. But you need to kill this loophole.

This ending of the loophole. So what is the loophole In simple: English Well, in simple: English There is a loophole that if you are self-employed, you could structure your income through an S corporation. You don't have to worry about the name or the phrase or whatever. Basically, you call up a CPA and you go yo make my taxes better.

Okay, and what they can do is the following: They could jump over and say okay, let's look at your income. Let's say you and your spouse make a hundred and fifty thousand dollars As self-employed people, let's now go in and say we're going to pay both of you a forty thousand dollar salary. So we're gonna divide up this 50k income in three ways. We're gonna say 70k of it is a dividend and we're going to say 40K and 40K are salaries.

Now What we're going to do is we're going to be able to change the way we pay taxes. See, ordinarily, if you make a hundred fifty thousand dollars of income the normal way, you're going to pay somewhere around uh, 12.4 percent in Social Security taxes plus about 3.88 3.9 Let's say in Medicare time oh no, sorry, 3.8 in Medicare you're going to pay somewhere around. Uh, is that right? Is it 12.2 Maybe it's about 12.2 puts you somewhere around 16.2 percent in taxes. So ordinarily, at 16.2 percent in employment taxes, you're looking at paying just employment taxes of somewhere around twenty four thousand, Three hundred dollars.

That's what they're showing here. And this is for someone making under 400k, right? This is 150k. Well, if we change it to you getting a salary of 40, a salary of 40 and a 70k dividend. Now what we could do is we could avoid paying that 16.2 percent on 70k.

So what we're going to do is, we're going to save you 11 340. That's what we're going to save you. Joe Biden is now saying hey, you know what? We're going to remove your ability to exclude that 3.8 percent from over here. So in other words, it's going to be an additional tax on people making 150 000 with this structure of somewhere around 2 660.

So in this example, simply put, if you're a self-employed person making 150 gram and you're using an S corporation, you might have to pay two thousand, six hundred sixty dollars more in taxes because of Joe Biden Ending that Medicare loophole. That's the bottom line. So think about that. The Treasury Department says we're on an unsustainable fiscal path.

Social Security and Medicare are probably going to run out of money by 2033-ish Joe Biden Here in this sort of breaking news from today in his budget reveal is suggesting: hey, don't worry, we're going to cover some of that problem by making sure we tax people more and this is going to make sure we can actually get to 2050 without cutting a penny in benefits. That's Joe Biden's argument. Now, will it actually go through with a Republican-controlled house? Probably not. Now a lot of people make the argument that, hey, well, this loophole isn't fair.

Anyway, why is it that self-employed people get to do this Well One of the reasons self-employed people get to do this is because these are known as payroll taxes. and when you're an employee, this burden is split. So when you're an employee, 50 is paid by your employer and 50 is paid by you. When you're self-employed you're responsible for paying all of it.

And in order to incentivize people to pay business or to create businesses and go spend more money on computers, equipment, and take more risk, the government has come up with this idea that, hey, well, let's give entrepreneurs a tax break. Now that's the way they paint it, But the reality is, it's probably the accounting Lobby That's like, hey, how can we complicate the tax code some more and basically sell more corporate tax returns? Because if you think about it, if you don't have an S corporation, you could just pay, do your regular 1040 personal income tax return and declare your self-employment income on Schedule C I Believe it is. Uh, now that is one tax return if you want to take advantage of this tax loophole and save you know 11 Grand or whatever in that example. Well, now you have to pay a CPA to do your corporate tax return and they might charge you a couple Grand a year to do that.

So now you've generated a couple Grand a year in recurring revenue. For accountants, you save nine thousand dollars net net in taxes. Now the government is out eleven thousand dollars. So it's probably the Accounting Lobby that's pushed some of that.

and that's probably why the tax code remains as complicated as it is, But it's very interesting to see Joe Biden create this potentially two-pronged attack I'm gonna raise taxes on those making over 400k, which is his campaign promise, but in the same vein, he's actually increasing taxes for a lot of self-employed entrepreneurs, especially those making under 150 160 000 dollars. A lot of those S corporation benefits start getting limited once you go above the Social Security limits of about 160 000 for 2023. The now you're really only saving about that 3.8 percent. But what's really remarkable is: think about this example.

This is where it gets a little bit crazier as well. Let's say you're making 250 000, right? That 3.8 and you're paying yourself maybe an 80k salary, right? Well, technically, you might be saving 3.8 percent on all of that difference, right? That's a lot, Because that's a hundred seventy thousand dollars times three point eight percent. Well, if Biden closes that loophole, it's actually going to cost somebody in this situation. Six thousand, Four Hundred and Sixty dollars.

So in other words, if you're self-employed and you have an S corp, you're looking at this going. dude. What the Hell Man, you said no Tax increases on people making under 400k. This is clearly a tax increase on those making under 400k.

Closing that loophole is just sort of the media way to cast it aside and say yeah, Well, it was just a loophole anyway. But it's been in existence for a very, very long period of time and a lot of people use it and rely on that and created s corporations because of that benefit. So it'll be very interesting. But it's just another example of politicians on one hand saying oh no, we're not raising your taxes, but on the other hand, raising their taxes.

And this is why I have programs on building your wealth specifically on how to maximize your tax benefits. Uh, whether you're an entrepreneur, whether you're an employee, the lead Hustler's course is great for them. Stocks and Psychology of Money and Zero to Million and Real Estate investing. Those are some of the most popular, but those are uh, that gives you a little bit of insight into what's actually going on with Biden Over here.

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