Where Anticipated Tax Hikes May Hit – Tax Planning

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While the three stimulus programs amount to over $4.5 trillion were mostly funded by government debt, the recently introduced $2.25 trillion infrastructure plan will be primarily funded by tax increases. Preliminary indications are that the anticipated tax hikes will target both corporations and high-earning individuals. The tax increases may be the largest since 1993. The following are among the proposals currently being considered:

  • Raising the corporate tax rate to 28% from 21%;
  • Reducing tax preferences for pass-through entities, such as LLCs, S-Corps & Partnerships;
  • Tax increases for individuals earning more than $400,000;
  • Expanding estate taxes;
  • Higher capital gains tax rate for individuals earning $1 million or more.

The lingering concern is that individual tax payers that are small business owners may end up paying higher taxes even if their incomes are below $400,000. This could occur if the existing 20% pass-through tax deduction is eliminated or altered, essentially affecting about 95% of all businesses in the United States.

Sources: Taxpolicycenter.org

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