Navigating Possible Tax Policy Changes
Plan for uncertainty by incorporating flexibility to accommodate changing policy.
To Roth or Not to Roth?
Learn why it may be an advantageous time to convert your retirement savings to a Roth IRA.
A Complicated Equation: State and Local Tax Proposals and the SALT Deduction
With federal, state and local tax policies all in flux, learn what is driving the debate.
Likelihood of Proposed Tax Policy Changes
Now that the House Ways and Means Committee has outlined its proposed tax plan to fund the $3.5 trillion reconciliation spending program, our experts break down the likelihood of proposed changes taking effect.
Our approach to tax policy
“It is far better to plan for, but not attempt to predict, potential policy changes.”
“While there are flexible planning strategies that will allow you to adjust to changing circumstances, your long-term goals should ultimately determine your plan.”
“Ultimately, the right mix of diversified assets depends on your goals – the foundation upon which all investing and tax management decisions should rely.”
Prepare your plan for change with our latest advice on tax policy and complex wealth.
Did you know?
3 – Attempts to repeal step-up in basis
The step-up in basis of inherited assets has been part of the Internal Revenue Code for more than a century, with three attempts to repeal or eliminate it ultimately proving short-lived.1
7th – Highest OECD country for top corporate tax rate
The proposed increase to top corporate tax rate would move the U.S. to tie with New Zealand for #7 out of 37 OECD countries with the highest statutory corporate tax rates.2
500% – Increase in taxable estate tax filings
If the estate tax exemption is lowered to $3.5M, the number of taxable estate tax filings would jump from an estimated 2,700 in 2021 to 16,600 in 2022.3
10th – Highest country for debt to GDP%
According to International Monetary Fund data, the U.S. is expected to rank #10 of nearly 200 countries in 2026 for government debt as a percent of GDP if taxes are not raised.4
1.4% – Reduction in after-tax returns
If the tax bills are enacted as proposed, expected after-tax returns for a moderate risk portfolio could be reduced by 1.4%.5
$11.7M – GST Exemption in 2021
Starting as a $250K exclusion in 1976, and increased to $1M in 1986, the GST Exemption has increased to $11.7M. It is scheduled to be reduced to $5M in 2026, or sooner, pending proposed legislation.
How long it takes to enact tax changes
LET US HELP YOU PLAN FOR CHANGE
Guided by the Northern Trust Institute’s evidence-based approach, our advisors can recommend strategies that have proven most effective in times of uncertainty. Request a meeting to prepare your plan for potential tax policy changes.
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1. The step-up rule dates back to 1913 with three efforts to repeal or eliminate it: The first was with The Tax Reform Act of 1976, but the provision was repealed before it could take effect. The second was with the Economic Growth and Tax Relief Reconciliation Act of 2001, but the provision was only effective for one year. The third attempt was a proposal from the Obama administration, which was never realized. Sources: DeLaney Thomas, K., Schmalbeck, R. and Soled, J. Advocating a Carryover Tax Basis Regime, 2017, University of North Carolina School of Law, as retrieved from https://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=1298&context=faculty_publications on April 1, 2021 and The Tax Policy Center of the Urban Institute and Brooking Institution, as retrieved from https://www.taxpolicycenter.org/briefing-book/what-difference-between-carryover-basis-and-step-basis#:~:text=The%20Economic%20Growth%20and%20Tax,additional%20unrealized%20gains%20carried%20over on April 1, 2021.
2. Organisation for Economic Co-operation and Development. Retrieved at https://stats.oecd.org/Index.aspx?QueryId=78166 on April 7, 2021. As measured by national statutory tax rates, which do not include sub-national tax rates or deductions for sub-national tax rates.
3. Urban-Brookings Tax Policy Center Microsimulation Model (version 0921-1). Retrieved from https://www.taxpolicycenter.org/model-estimates/baseline-estate-tax-tables-dec-2020/t20-0258-estate-tax-returns-and-liability-under on April 10, 2021.
4. International Monetary Fund (IMF) World Economic Outlook (April 2021). Retrieved from https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD as of April 7, 2021
5. The Northern Trust Institute Research of tax-optimized strategic asset allocation models