The American Families Plan, unveiled by President Biden on April 28, provides for expansive programs in the areas of education, child care and family support, all to be funded by significant tax increases. Many of these are designed to target wealthy individuals and high earners, including business owners. Specifically, the plan includes the following tax proposals:
- Increasing the top individual income tax rate and taxing capital gains at the same rate for incomes of over $1 million
- Ending carried interest and restrictions on like-kind exchanges of property
- Ending the “step up” of basis in property transferred at death for gains in excess of $1 million
- Eliminating rules that allow taxpayers making over $400,000 to avoid the 3.8% Medicare tax on earnings and net investment income
- Permanently extending the Tax Cuts and Jobs Act of 2017 limitation on the deductibility of passive losses
- Requiring financial institutions to report information on account flows to better track opaque sources of income subject to tax
- Providing additional IRS funding to focus on compliance by large corporations, businesses, estates, and higher-income individuals
Watch this recorded webcast to explore what this plan, combined with proposed corporate tax changes in the Made in America Tax Plan, could mean for the middle market. As Congress negotiates the proposals, understanding the wide range of tax implications including timing, effective dates, and the possibility of retroactive application will help in planning considerations.
