With Democratic Candidate Raphael Warnock projected to win the first of two senate races in Georgia, many are forecasting a 50-50 split senate which could make Biden the first President to begin his term in a divided government since George Bush in 1989.
The divide is thought to be fuelled by Wall Street and Real Estate professionals, seeking a split senate amid rising concern over Biden’s push for tighter regulations to the Financial Services Industry and it’s a concern shared by many Family Offices.
Despite donating more than $50M to Biden’s Presidential Campaign in the lead-up to November, Wall Street professionals are reportedly offering a late surge of donations to Republican Candidates Kelly Loeffler and David Perdue in a bid to create this divide and it could just provide a win-win situation for Family Offices, also monitoring the evolving financial landscape.
Among donors are top finance CEOs Stephen Schwarzman of Blackstone Group and Kenneth Griffin of Citadel LLC who have donated millions to the senate leadership fund superpac, supporting Perdue in the fight being described as a money war.
A 50-50 split senate could present significant challenges to changes to taxation policy which since announced last year, has had a tremendous impact on Family Offices.
Many multi-family offices and advisors have been publicly pleading with families to consider their long-term multigenerational goals before considering wealth transfers or gifting strategies, two conversations that are dominating the Family Office community today.
Biden has pledged to bring in higher taxes on the wealthy by unstitching much of Trump’s 2017 Republican Tax Law and while manifestos are always subject to change, Biden will likely push to increase top federal income tax from 37% to a pre-Trump rate of 39.6%. He will also raise corporate tax from 21% to 28% and estate tax from 40% to 45%.
Biden’s ambition to return estate tax to its 2009 threshold also means lowering the exemption amounts from $11.58 million for estate and gift taxes in 2020 to $3.5 million for the estate tax and $1 million for the gift tax while a reversal of the current step-up in basis rule could jeopardise multigenerational wealth transfer.
Without securing two seats in the Senate, Republicans would effectively yield veto power over Biden’s Political and Judicial nominees as well as his legislative initiatives including these changes to taxation. While Family Offices supported Biden in the masses last autumn, a split senate could delay or rescind any detrimental changes to taxation which could just provide the win-win situation Family Offices are after.
While many anxiously await the results of the two senate races in Georgia, one thing remains certain and that is the Biden Presidency will be shaped weeks before it commences on January 20th.
Do you think a split senate provides a win-win situation for Family Offices?