zation for 5 years of typical transportation maintenance
Corporate Taxes: There still appears to be a strong
spending. This spending is not really ‘additional spend-
push to raise the corporate tax rate, which was previ-
structure thrust and lessening the political pressure to
of the Tax Cuts and Jobs Act. Numbers have ranged
ing’, further bringing down the real size of the infraraise offsetting revenues.
Meanwhile, the House and Senate also approved a
2022 budget resolution that provides reconciliation
instructions for a $3.5 trillion spending package. Reconciliation allows for budget-related bills to pass filibuster
proof with only a simple majority, meaning that a larger spending bill could potentially pass later this year with-
out any Republican support.
It’s possible for the full package to pass, but we think
ously lowered from 35% down to 21% in 2017 as part between 25% to 28%, with the higher number remain-
ing the preferred figure. The Democratic party has
declared, however, that they will not raise taxes on small businesses (e.g., family farms).
Investment Taxes: Proposals remain intact to treat
long-term capital gains and qualified dividends as ordi-
nary income for taxpayers with taxable income above $1 million. If enacted, this would result in a top marginal
capital gains tax rate of 43.4%, when including a new
that is unlikely. With the Senate evenly divided 50-50,
top marginal rate of 39.6% and the 3.8% net investment
united. They literally would not be able to lose a single
Estate Taxes: This may seem like the most cut and dry
this route requires the Democrats to stay completely
Senate vote. Such a razor thin majority means that we
income tax.
of impacted areas, although nothing in trust and estate
think compromise is likely on many of the key provi-
tax law is ever that simple. Nevertheless, current plans
limitations of the budget reconciliation process, bills
above $1 million for individual and $2 million for joint
sions of President Biden’s agenda. Additionally, due to
call for capital gains taxes at death on unrealized gains
must be ‘revenue neutral,’ meaning Congress cannot fi-
filers.
all, of the proposals will require a variety of tax increases,
social security payroll tax on wages above $400,000, to
nance the package via the deficit. Paying for most, if not predominately impacting high income individuals and corporations.
The Art of Compromise Due to the slim majorities, Democrats have already
begun to compromise on a couple of President Biden’s
initial tax proposals. Here is a summary of where things stand currently on key tax issues, as well as on a few
items that seem to already be on hold:
Individual Taxes: Democrats have consistently stated
their intention is to avoid raising taxes on families
making less than $400,000. Current proposals remain
for raising the top marginal income tax rate from 37%
to 39.6%, which would apply to income over $452,700
for single and head of household filers and $509,300 for
joint filers.
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A Few Items on Hold: Original plans to apply the
restore the 2009 federal estate and gift tax levels ($3.5 million federal exemption and $1 million lifetime gift
limit at a 45% maximum tax rate), and to place a cap
itemized deductions for higher earners all appear to be on thin ice at the moment.
As always, we will continue to closely monitor the
evolving situation in DC for potential impacts on your
financial plan. As these plans come into greater focus,
we may make recommendations on a proactive basis to
help clients get in front of any potential issues that can
impact specific planning goals. Please feel free to schedule a call with a Financial Consultant if you have any
questions, and in the meantime, subscribe to our Finan-
cial Planning blog for updates on these issues and more. Please consult with an attorney or a tax or financial
advisor regarding your specific legal, tax, estate planning,
or financial situation. The information in this article is
not intended as legal or tax advice.
