The US Elections! Trump vs Biden! NRIs and Immigrants! Millions of H1-B visas! But what about the tax implications? Prez Donald Trump, also known as the ‘tariff man’ brought about substantial changes in taxation. He cut the corporate tax rate from a tiered range of 15% to as high as 35% (depending on taxable income) to a flat 21%. He also retained the old structure of 7 individual income tax brackets. But in most cases, he lowered the rates. While the top rate fell from 39.6% to 37%, the lowest bracket remained at 10%.
For the Indians in USA, this was a great thing as they believe in savings. They are conservative and Trump’s Taxes help them save their hard-earned money.
It went on to affect a great number of Indians. An article by Quint, featuring Geeta Chopra of Pennsylvania dives into a lot of detail. She invested in a franchise business, hired 35 people, and she was able to do this because of the tax cuts and deregulation that the Trump administration offered. She is also a TV presenter and writer, and she believes that all the gains will be wiped out if Biden becomes US President.
This is because Mr. Joe Biden plans to increase the corporate tax rates from 21% to 28% and individual income tax rates from 37% to 39.6% on income above $400k. The annual $400k limit applies to 1.8 percent of Indian families, which are expected to earn 24.8% of the income in 2021. She compares this to a wartime plan. “They aim to generate taxes in the range of 19.5% of GDP, which is comparable to the financing needed for Vietnam, Korean, and WW2 wars. We are not in a war. Why even come to America then.”
But here’s the click! 75% of Indian Americans have a graduate degree. This is double compared to 31.5% of Americans. And a majority of them will definitely look at social problems. Moreover, there’s a great divide between the ideals of Republican Trump vs Biden Democrat. Biden might have a more consensual style of presidency. It might just be morally correct to go with the Republicans. Biden would strive to curb the USA-European Trade War. And not to forget the ‘Kamala-Harris-factor.’ She‘s a Republican and an Indian. But Trump has the ‘Howdy-Modi’ under his sleeve too. And there’s one thing for sure, no one can ever truly replace the ‘tariff man.’
In the 2020 Indian-American Attitude Survey, taxes rank as the 4th most important factor of the US elections while the Economy remains the-most-important factor. So, should a citizen worry about the economy or his/her personal savings? A question everybody needs to ask. But one thing cannot go unnoticed over here. Only 3% are worried about U.S.-India relations. This explains a lot. For the community, “kitchen-table issues” rank higher than foreign policy concerns.
Talking about Healthcare, which is the second most important. H1-B workers pay billions in taxes in the USA. Almost 70% of all H1-B visas issued by America are for Indians. Total taxes contributed by all the H1-B visa holders stand at $85B. The average salary of an H-1B visa holder in the US is $118,100. So, with a base rate of 24%, he or she pays $28,344 in taxes each year. A chunk of these taxes – 7.65% of the annual income, or $27.1 billion per year – goes towards benefits such as social security, medicare, local businesses, and American companies which don’t cover H-1B holders. It is safe to say that ‘tax’ is just another pillar under the same roof.
But this is not the end. Immigrants, students, and visa holders remit large portions of their salary to their home countries. There is of course no limit to how much money they can send to their relatives, provided they’ve paid their taxes in the USA. But there’s also a limit of $14k per person per year for the tax-free transaction. Any amount sent above the $14k per person per year is eligible for gift taxes in the USA.
This is quite thought-provoking. So if you earn an average of $118,100 which is equivalent to INR 88L. Firstly, there’s a base rate of 37% federal tax, which Biden wants to increase! Secondly, the additional state taxes, which might vary greatly depending on the state. Thirdly, immigrants send enough money back home for their parents. There’s a tax on that, too. And not to forget the wild living expenses of the USA. And only after all of this can one talk about savings. Considering all of this, a President who can stand up to better tax reforms may just seem to be a better candidate for the elections.
Whatever the results, the entire world will be watching.