2021 Tax Update: Comparing and Preparing for the Latest Tax Proposals
Current as of: May 2021
Proposals call for significant increases on taxes paid by high-net-worth individuals.
The prospects for significant tax policy changes have grown considerably now that the White House and both chambers of Congress are under single-party control. President Biden has made it clear that he wants to overhaul our tax system to make the wealthy pay more taxes. In addition to plans emanating from the White House, Democrats like Senator Bernie Sanders are advancing their own tax proposals to fund new programs.
The tax debate is now beginning to take shape, and it’s important to understand how changes in tax policy may affect income and wealth transfer taxes. To that end, we’ve prepared the following summary of the various proposals and how they differ from current tax laws.
Individual Tax Proposals
Individual Tax Rate
Social Security Tax
Estate & Gift
Bernie Sanders’ Proposal (99.5 Percent Act) - March 25, 2021
Estate & Gift
Annual Gift Exclusion
Sensible Taxation and Equity Promotion Act (STEP Act) March 29, 2021 – Close the Stepped-up Basis Loophole
Higher income and wealth transfer taxes will clearly be at the center of the tax debate over the next several months. That said, the prospects for sweeping changes in this environment are less certain. Lawmakers will be loath to run the risk of derailing the economic recovery with a large tax hike at this time. And while Democrats control the White House and Congress, their razor-thin majority in the Senate will make it a challenge to push forward with their more ambitious plans.
Still, it’s quite possible that some of the proposals will be taken up as part of a compromise between the two parties. We will continue to monitor developments on the tax front and keep you up to date on how your wealth strategy may be impacted.
For more information, please contact your Key Private Bank Advisor.