Tax Bill Will Wait
The incoming Biden Administration has made some proposals that would affect our taxes, prominently including a complete rollback of the 2017 tax cut for taxpayers with income above $400,000. The plan would also tax capital gains at the same rates as ordinary income for people with more than $1 million in income. The corporate tax rate would rise from 21% to 28%. The estate tax exemption would drop by about 50%, and the proposal would eliminate the step-up in basis on assets held at death. (There is talk about student debt forgiveness, but it is not in the current bill under discussion.)
But the first priority in Congress appears to be the $1.9 trillion coronavirus relief proposal, which includes direct payments of $1,400 per person, and includes a number of tax provisions. The bill would expand the child tax credit (from $2,000 to $3,000 per child or $3,600 for each child under 6) and child tax credit (up to 50% of all child care expenses for children under 13, up from $3,000 to $4,000 for one child and up from $6,000 to $8,000 for multiple children). The Earned Income Tax Credit would be expanded as well; currently, only those making $16,000 or less qualify for the credit, but the relief bill would raise the cap to $21,000, and expand eligibility to workers 65 and over.
To pass any tax increases, the incoming President would need to gain the support of every single Democratic Senator to pass any tax legislation. And some Democrats—including Joe Manchin of West Virginia—are questioning the wisdom of raising taxes when the U.S. economy is still recovering from recession. So we will need to watch the political winds and examine the actual bills as they move through Congress before we can make any recommendations.