President Biden introduced his American Families Plan on Wednesday, a proposal that would include $1 trillion in new spending and $800 billion in tax cuts and credits for middle- and lower-income families. The plan’s primary focus is on the expansion of access to child care and education. The proposal, however, would hit real estate and private equity pretty hard:
- An increase to the top tax rate for individuals (39.6%).
- An increase to the top capital gains rate for those making more than $1 million. Income more than $1 million would be taxed at the top tax rate for individuals (39.6%).
- The elimination of “carried interest.” Income would no longer be taxed at preferential rates, but instead would be taxed at the top tax rate for individuals of 39.6%.
- A limit on gains eligible to be deferred through Section 1031 exchanges to $500,000.
- The elimination of the “step up in basis” for gains in excess of $1 million, or $2.5 million per couple.
- A significant increase in funding to the IRS. Hello, expanded enforcement and tax collection efforts!
According to the New York Times, Wall Street Journal and many other national news publications, Democratic lawmakers quickly expressed their disappointment that the restoration of the state and local tax (SALT) deduction did not make it into the final draft.
Lawmakers in high-tax states such as California, New Jersey and New York are already looking for the restoration of the SALT deduction to secure their votes. So how likely is it that the American Families Plan will get through Congress in its current form? Good question. This is a developing story, but we’re on it! Be sure to subscribe to the blog, bookmark CLAconnect.com and register for our Livestream Series for updates and further analysis.
Sources: Bloomberg Tax, RIA Checkpoint, New York Times, Wall Street Journal
Carey M. Heyman