Paul L. Caron

Monday, January 25, 2021

NY Times: With Higher Taxes Possible, Here’s What To Do Now

New York Times, With Higher Taxes Possible, Here’s What to Do Now:

President Biden has already made clear his tax priorities. His proposed $1.9 trillion pandemic relief bill would cut taxes for lower- and middle-income Americans, and he is expected to call for higher taxes on corporations and the rich.

How many of his plans become law remains to be seen. But he has given a signal that he is moving toward fulfilling his pledge of rolling back former President Donald J. Trump’s tax cuts. Mr. Biden’s campaign plan would increase taxes by more than $2 trillion over a decade, according to the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution.

“It’s more useful to think about what President Biden has proposed as a $3 trillion tax increase on corporations and high earners and a $1 trillion tax cut for everyone else,” said Howard Gleckman, a senior fellow at the Tax Policy Center. “My sense is it will be easier in the current political dynamic to get the tax cuts he talked about than the tax increases.”

Last week, I wrote about long-term tax-planning issues, focusing on how proposed changes to the estate tax could affect many more people [Biden May Eliminate Step-Up In Basis At Death, Hurting Jeff Bezos, Elon Musk, And Efforts To Close The Black Wealth Gap]. This week, I’m turning my attention to some of the short- and medium-term tax proposals that could affect people’s earnings and financial decisions.

Of course, making a decision affecting taxes is not easy without knowing what the political landscape will look like. But for many wealthier people, it may make more sense to pay the taxes now rather than risk a rise in rates later in the year, particularly if you were going to do something that would incur the tax anyway.

There are some immediate tax questions that need to be addressed. ... 

Perhaps the biggest concern for this year is what happens to the capital gains tax rate, currently 20 percent. Most wealth advisers are betting on an increase, probably to the same level as the tax on income. That is not such a jump for most earners, but it would be for someone in the highest tax bracket, 37 percent.

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