The Biden administration proposed two major themes in its tax reform agenda. These were widely promoted during the campaign and then heavily promoted by the White House and the U.S. Department of the Treasury over the past year. Now, one year after the administration began work, this blog post reviews the progress made and the prospects for the future.
- No new taxes for taxpayers under $400,000 income – One year into this administration, it is clear that this major tax policy objective has been met. There have been no new taxes on individuals or businesses with income under $400,000. There are no proposals on the horizon to raise income taxes on those with income under $400,000.
- Increased taxes for taxpayers over $400,000 – Various proposals to increase taxes on high income taxpayers have been proposed but have not been achieved. These tax policy proposals were included in the Build Back Better legislation that was was passed by the U.S House of Representatives but then blocked by the U.S. Senate. There is no indication of progress on any measure that would raise taxes on high income earners. While there are occasional bits of stories on the possibility of reviving tax measures in the future, none of these rise to the level that warrant serious consideration in our tax planning work.
One of the two major tax polices has been met by the Biden administration with no likelihood of change in these results in he foreseeable future.
Tax planning implications
A core fundamental principle of modern tax planning is the preparation for expected higher effective tax taxes in the long term future than we have today. This remains as our core long term forecast, despite the fact that there seems to be no way to envision this happening under the current government administration and legislative branch. Recent analysis published by the U.S. Treasury Department and U.S. General Accounting Office as well as multiple private sources conclude that our federal government is financially unsustainable at correct levels of taxation and spending. There is no indication that the current government will be able to address this unsustainable financial scenario while the Senate has the ability to block the administration’s tax reform proposals.