I’m not a particularly partisan fellow and I’ll vote for either party in elections, deciding on issues, character and dependability – the usual considerations in a rational election process.
If anyone asks, I’ll sometimes say that at heart I’m an anarcho-capitalist, mainly to flummox them, as I’m not entirely sure that my claim makes real sense.
In less geriatric-adolescent moments, and truer to heart, I declare myself a Son of Liberty, despiser of tyrants, friend of the downtrodden, ever ready to seize my Brown Bess (if I had one) to struggle for life, liberty and property – pardon, I mean the pursuit of happiness. In my frame of reference, and in the political spectrum of contemporary America, this makes me a rather staid moderate.
It wasn’t always this way. In 1980, when Ronald Reagan took the White House in a decisive victory, I had more than a blush of pink in my cheeks, if you follow me to the leftward side of the isle. Reagan’s win was the beginning of a switch towards reason for me, not exhibited when the Yankees come to Boston. Still, in the less vital political realm, I started seeing things though less-filtered eyes. If so many of my fellow citizens support policies I abhor, perhaps there’s something to them – maybe I’m not seeing the full picture, at age 20. This was my first brush with the lifelong project of maturity, and it worried my friends.
Reagan’s triumph was a shock for liberals – he promised to ‘bust up the joint’ and we ran scared. How far would he go? In the event, the ground moved, but the edifice remained standing. The Democrats grabbed Congress in the midterms and compromise reclaimed the political waves. Even the ultra-right zealots proved less than dragonly; many showed the familiar face of flawed humanity, via tawdry affairs and a penchant for financial malfeasance. Uprightness can be a strain.
When people ask whether I’m religious, I say yes, though I’m not particularly good at it. A modest acceptance of one’s failings generally moderates actions and opinions. Eventually, soothed by this eternal revelation, a divided country began looking less tatty and unraveled. We thought times were tough, true, but looking back it all looks so shiny – perhaps a fool’s-gold glitter – a model of temperance. Hard to imagine, but things can be so.
Today we have President Donald Trump. Even those who rate him highly find him a bit of an itch, as my mother, always delicate in her most biting assessments, would say. Across the opposition isle – well, this forum is no place for that kind of language.
Take the Tax Cuts and Jobs Act of 2017. In my assessment – recall, I have defined myself as the voice of reason in the room – TCJA was reform lite, a fine-tuning with a limited shelf life, as the established rates revert to Obama-era levels at midnight on December 31, 2025. We’ve been incessantly counseling clients to seize the opportunities of TCJA before they vanish, and we do so again today.
The president would like to make his reforms permanent and perhaps even extend them, but formidable obstacles block his way: even if he wins the November election, he faces a steep uphill struggle, because his opponents seem so disinclined to cooperate.
Consider the tax reform plans just released in the form of the Biden-Sanders Unity Task Force Recommendations. While it isn’t a binding party platform, it nails down stout principles for Joe Biden, the Democratic candidate: tax policy should aim to redress perceived income inequality and over-concentration of wealth in the US, as well as cover the rising cost of national governance.
The Biden camp has partnered with the team of Senator Bernie Sanders, an avowed socialist. Even low-tax true believers will usually concede the need for flexibility – sometimes, rates need to rise. Still, given the times and the proposal’s authors, this may be a good time to prepare for a real jolt.
The task force’s report is complex, but we can present its salient features. Under a Biden presidency, the top income tax rate could rise from the 37% defined by the TCJA to 39.6%, where it sat pre-reform. It’s unclear whether the state and local tax deduction would be reinstated – a curiosity in an otherwise detailed program – but knowledgeable analysts assume that it would return. If that were to occur, wealthy earners might not see much, if any, increase in their combined income-tax bill.
The Biden/Sanders report envisages increasing payroll taxes on high-wage employees, which are split evenly between worker and employer. This could be costly for businesses and would take the tax bill for top-bracket earners to 48.4% at the federal level alone, before considering state and local levies.
Changes to capital gains treatment are proposed: the preferential 20% rate for high earners today would be eliminated, and capital gains would be treated as ordinary income and taxed as such, with a 3.8% net investment income tax tacked on top. These changes could be painful for wealthy investors.
On the estate and gift tax front, critics have long called for eliminating the step-up in basis, currently a powerful tool for reducing taxes on inheritable assets. If Biden accepts the task force’s recommendation, the step-up would become history, but the candidate has not yet declared his support or opposition to the proposal.
The task force also wants to return the estate tax exemption to levels in play before the TCJA. This should happen in any case on January 1, 2026, unless the TCJA is extended.
In normal circumstances, we counsel moderation. Extreme proposals rarely come to fruition, while adept advisors and investors have a good record of adapting to reasonable policy adjustments. Given the polarity in the political landscape, intensified by stresses created by the pandemic, we worry that under the right circumstances, the pendulum could swing back violently. For estate planners and their clients, we recommend wise and swift action.