U.S. House Democrats proposed new legislation on Monday, which, if passed, could affect corporate, personal, and estate tax rates. Though this new legislation largely undoes the tax cuts passed under the Trump administration, it is substantially less severe than the proposal made by President Biden earlier this year. The House Ways and Means Committee intends to debate the legislation this week, but given the need to pass a new appropriations bill prior to September 30th or risk a government shutdown, it would not be surprising to see delays as the House debates this new tax legislation.
The new legislation looks to make several major changes:
Business Income Tax
- Raise the top tax rate on corporations from 21% to 26.5% (remember, Biden proposed a 28% corporate tax rate).
- The new legislation would graduate the corporate tax rate so that only businesses with income above $5 million see taxes increase.
Personal Income Tax
- Raise the top marginal individual income tax rate from 37% to 39.6% on individuals with over $400,000 of taxable income and married couples with over $450,000 of taxable income. (these thresholds are lower than Biden’s proposed thresholds).
- Increase the capital gains tax rate to 25% (from a current 20%) for individuals with over $400,000 of taxable income.
- Lower the estate tax exemption from a current $11.7 million per person or $23.4 million per couple to roughly $6 million per person or $12 million per couple.
- New trust taxation rules would require that grantor trust assets be includable in the estate of the grantor. This rule would only apply to new trusts created as pre-existing grantor trusts would be grandfathered in to the old rule. Nevertheless, this rule change could diminish the usefulness of common estate tax planning strategies.
Let Us Know What You Thought about this Post.
Put your Comment Below.