The Tax Legislation Waiting Game

There is a lot at stake as the Democrats maneuver to pass tax and spending legislation to advance the Biden agenda.

We are in a period of “once in a lifetime” politics with the convergence of budget reconciliation, debt ceiling expiration and infrastructure investment combined with a razor thin majority in the Senate.

The passage of legislation is far from done and by time you read this there may already be legislation passed or the entire passage may be completely dead. Regardless of the outcome the next few weeks will set the stage for tax policy over the next 4 years or longer.

At the heart of the Biden agenda is the $3.5 trillion tax and spend proposal a.k.a. social spending or budget reconciliation bill. As of this writing, the House Ways and Means has a “mark-up” of a bill waiting to be introduced to the House. There is significant decent in the Senate which appears to make this “mark-up” unpassable.

The $3.5 trillion bill is telling. There is a lot in this several thousand-page bill. Primarily, the approach is to significantly increase social spending and pay for it through taxing corporations and “the rich”. Fundamental to the Biden Tax Policy is that we want to increase taxation for individuals and businesses who make “too much”. Additionally, there is the desire to reduce individual’s ability to pass wealth to their heirs without paying significant tax and thus diminish the ability to unfairly pass generational wealth. This is a fundamental change to the current tax policy which will require us to be adaptive to whatever final law, if any, is passed.

We believe that the politics will get worked out in October, a bill will get passed while infrastructure and the debt ceiling get resolved. Although that seems unlikely at the moment. We do not believe that the Democrats will be able to pass an aggressive $3.5 trillion spending amount. However, we do believe that the final price tag will be between $2 – $2.5 trillion. The tax provisions are uncertain at this time. The corporate and individual tax rate increases seem certain while there is a lot of room for negotiation around estate tax provisions, capital gains changes, the state and local tax deduction limit and fate of the current business 20% deduction (§199A).

We will monitor this matter very closely and get information out as soon as we have more details. In the meantime, do not do anything specifically based on the speculation of pending law change. However, if you have not already began to address your estate and trust matters, please contact us or your estate attorney immediately to address pending changes and their impact on your specific situation.

It is imperative during this period of uncertainty to tap into the information we distribute and schedule meetings to address the impact of any passed legislation on your specific situation.


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