Expert: Biden’s tax proposals are ‘really a means to an end’

John Gimigliano, KPMG Lead of Tax Legislative Services, joins Yahoo Finance's Kristin Myers to break down President-elect Biden’s tax plans and what’s at stake for company and individuals.

Video Transcript

KRISTIN MYERS: Now, let's talk more about what to expect under the Biden administration, especially when it comes to taxes. We're joined now by John Gimigliano, Lead of Tax Legislative Services at KPMG. So, John, let's first start with what Jess was just talking about-- the Business Roundtable.

They were highlighting some social issues, which I think might come as a surprise to some, that we hear these corporate America, these CEOs highlighting the need for raising the minimum wage, for example, more economic stimulus, of course, no surprise there that they would be interested in that. What do you make of some of these priorities, especially now that we have not just a Democratic House, but also a Democratic Senate and a Democratic presidency?

JOHN GIMIGLIANO: Well, thanks for having me, Kristin. And I'm happy to be here. And you know, it's a really great question. And the business community, I think, has really-- it's a reminder as they go through the priority items that it's never quite as simple as it appears, right? There are multiple pieces, multiple issues that overlap and interact all the time in terms of what is best for a given business, but also there's stakeholders of those businesses.

And so whether that be-- you know, for example, just going back to the question of where they might come out on taxes-- well, it's never as simple as just saying, we oppose higher taxes, because the only way to really think about that in totality is asking the question of, higher taxes for what? So if we're going to raise revenue, where does that revenue go? And so it's a very complex issue. And obviously, they're trying to weigh, I think in real time-- as all of us are-- how all those different complex issues interact.

KRISTIN MYERS: Now, I'm going to ask you-- I know you were just mentioning it is difficult to predict, but I'm still going to push you on where you think it's going to go in terms of tax legislation. I think a lot of folks were particularly worried with Democrats having power in both the House and the Senate that tax hikes were coming down the pike, particularly corporate tax hikes. I'm wondering, however, given that we are in the midst of a pandemic, if it is more likely in your mind that that issue will be kicked a little bit further down the road-- until we deal with the economic crisis that we currently have at hand and the economic scarring that is definitely going to linger from this pandemic.

JOHN GIMIGLIANO: It's a very fair point right that of course-- there is a risk that raising taxes dramatically during an economic recovery could be counterproductive. It's a question, though-- economists will differ on this point of view-- to what extent and how much. So balancing all those things out is going to be something that I'm sure the Biden administration and members of Congress are going to be thinking about.

But I think it's also important to think about when we think about the Biden tax plan, we have to un-remember, unlearn what we learned in 2017, which was for Republicans, doing taxes was just about taxes. In Biden's case-- and this was very clear during the campaign-- his tax proposals were really a means to an end. We can raise tax revenue here and spend it in this way.

And so the only way to really understand what is happening in taxes is to know what's on the other side of the equation, what's on the other side of that bill-- that we would raise taxes to spend on these other priority items. And until we know how those priority items align with the tax increases, it's really hard to handicap which ones come through and to what extent.

KRISTIN MYERS: Now, I know we keep talking about this Democratic Senate, Democratic House, however, the margins are-- it's an even split right now, 50-50 in the Senate. And we cannot necessarily count on all Republicans to vote in one voting block, nor can we count on all the Democrats to vote on one voting block on some of these issues. I'm wondering what you think some of the consensus will be going forward, particularly around issues of taxes, or perhaps even further economic stimulus.

JOHN GIMIGLIANO: Yeah, I'm as guilty as anybody of just saying, you know, we've got red, and we've got blue, and Republicans and Democrats-- and we just have to remember, there's a vast diversity of ideological viewpoint within red and within blue. And it will be very challenging, I think, for Democrats, with the narrowest of margins in the House and in the Senate, to get consensus to move things through.

But I'm of two minds on this, because at the same time, it's been 10 years since Democrats have controlled the House, the Senate, and the White House, and I think there are significant expectations. And those expectations are going to be riding high that they deliver. And we can't underestimate the effect of that dynamic as well is that people might otherwise agree to do things they were otherwise reluctant to do because of those expectations that they actually deliver. So there will be a lot of challenge, I think, for even those moderate Democrats to look really hard at some of these Biden proposals and ask, can I sign on to this?

KRISTIN MYERS: Absolutely. John Gimigliano, KPMG's Lead of Tax Legislative Services, thanks so much for joining us.

JOHN GIMIGLIANO: Thank you.