Dear Garden State Trust:
What are the chances that we will see tax reform soon?
—Rate Worrier
Dear Rate:
Based upon past experience, I would say that the odds are somewhat against tax reform this year. Usually tax reform legislation has had a lengthy and public process as it moves from broad goals to specific, practical tax code language. Little of that has occurred this year. Also, a general rule of thumb has been that the Congress wraps up major tax legislation by the August recess, which hasn’t happened.
However, past experience may not be the most useful guide to what is currently developing in Washington, D.C. In June the Treasury Department issued its Green Book of recommendations for tax changes in the next fiscal year. It included an increase in the top income tax rate, elimination of the preferential capital gains tax rate for the very top taxpayers, and a new rule for imposing a tax on capital gains at death. Under current law appreciated assets get a tax-free basis step-up when they are inherited. Such a change has enormous implications for estate planning.
As a wise man once reportedly said, prediction is hard, especially about the future. It must be noted that in the first year of the Trump administration there was similarly no well-developed legislative proposal by the usual August time frame, yet the Tax Cuts and Jobs Act was enacted in December 2017. Anything is possible.
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(August 2021)
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