On April 28, 2021, President Biden introduced the American Families Plan to a joint session of Congress. The plan confirms previous statements from the Biden administration, indicating that it would propose tax increases on wealthy households and tax breaks for low- and middle-income families.
The $1.8 trillion plan consists of $1 trillion in investments and $800 billion in tax cuts. It proposes investments in education, including free universal preschool, two years of free community college, and programs to address teacher shortages. The plan also addresses direct support for childcare, school-related nutrition programs, and a national paid family and medical leave program.
The plan further proposes the following tax breaks for low- and middle-income families:
The plan proposes to pay for those investments and tax breaks by:
The Biden administration estimates that these proposed tax increases will raise $1.5 trillion over ten years.
Noticeably absent from the plan was any mention of reducing the estate tax exemption or raising the estate tax rate to 45%, which was a Biden campaign proposal. While the estate tax does not generate a large amount of revenue, reducing the federal estate tax exemption continues to be at the forefront of the Democrats’ legislative plans.
The American Families Plan likely is more ambitious than what eventually will be implemented, and legislation that is eventually passed likely will not be retroactive. One cannot predict with certainty when and what the final outcome will be; however, tax increases seem inevitable. Proper tax planning remains essential.
Taxpayers are encouraged to contact their Private Client Services tax advisor to evaluate their current estate plans and discuss strategies for minimizing the impact of future potential tax changes.