With Congress now having passed a $3.5 trillion budget blueprint, legislators have moved one step closer toward anticipated tax policy changes.

However, an arduous process remains. The blueprint now must be translated into a detailed bill, with multiple committees needing to craft their portions in such a way to secure agreement among all 50 Senate Democrats and nearly all House Democrats, moderate to progressive, a behemoth feat.
That said, it has been many months since President Biden took office and potential changes to tax code took center stage in financial planning. Now is a good time to review which proposals remain on the table, the likelihood that they pass and any forward-looking planning you may want to consider as legislators continue to negotiate.

Current Proposals

The blueprint gives the Senate Finance Committee wide latitude to draft policies that would increase tax rates for corporations and individuals making more than $400,000 a year. Below we provide six specific proposals that continue to move forward and the likelihood that they pass — based on what appears to be the consensus view.1

01 | Raising the individual income tax rate.

D E T A I L S : Increase the top individual ordinary income tax rate from 37% to 39.6% for families making $400,000 or more.
L I K E L I H O O D : High but possibly amended. This change is relatively small and would bring the rate back to where it was in 2017 prior to the Tax Cuts and Jobs Act.2 However, it is possible that negotiations result in a rate somewhere in between the current 37% and proposed 39.6% rates.

02 | Raising the top corporate income tax rate

D E T A I L S : Increase the top corporate income tax rate from 21% to 28%.
L I K E L I H O O D : High but likely amended. Many Democrats will likely oppose such a large increase. A more likely outcome would be to boost the rate to 25%.

03 | Increasing the tax rate for long-term capital gains and qualified dividends.

D E T A I L S : Raise the long-term capital gains and qualified dividend tax rate from 20% to 39.6% (+3.8% net investment income tax) for families making more than $1 million. Further, in its Green Book release in late May, the Biden Administration suggested this change may be retroactive, that gains recognized “after the date of announcement”3 (rather than the effective date of the law), would be subject to the higher rate.
L I K E L I H O O D : High but likely amended. The consensus seems to be that, if raised, the rate might increase to a range of 25-30% and would likely not be retroactively applied.

04 | Increasing the State and Local Tax (SALT) deduction

D E T A I L S : Increase the current SALT cap beyond its current $10,000. The SALT deduction allows taxpayers who itemize deductions to reduce their federal tax bill by a portion of their state and local taxes paid. In a memo to Democratic senators, the Senate Budget Committee explicitly asks lawmakers to make the deduction more generous.4
L I K E L I H O O D : High but to an unknown amount. More than 20 House Democrats have voiced opposition to legislation which doesn’t include a higher SALT deduction.5 But it remains unclear whether the deduction will be increased or fully repealed.

05 | Repealing the step-up in cost basis at death

D E T A I L S : Realized capital gains exceeding $1 million per individual would be recognized on assets transferred upon one’s death or as a gift. Currently, the cost basis of appreciated assets is “stepped-up” to fair market value as of the date of death.
L I K E L I H O O D : Unclear. This is a controversial proposal that may encounter pushback from both sides of the aisle and would be a sharp departure from tax code dating back to 1921.

06 | Increasing taxes paid on carried interest

D E T A I L S : Raise the taxes hedge fund and private equity partners pay on their share of income on an “investment services partnership interest” (ISPI) from capital gains to ordinary income tax rates if the partner’s taxable income (from all sources) exceeds $400,000.6
L I K E L I H O O D : Somewhat likely. This proposal may have bipartisan support, but industry advocates have historically helped thwart prior efforts to change the taxation of carried interest. It’s quite possible that tax policy in this area changes but to a lesser extent than currently proposed.7

Planning Opportunities to Discuss with Your Advisors

Although policy uncertainty persists and will persist in the coming weeks as negotiations evolve, now is a good time to discuss potential planning opportunities with your trusted team of advisors. Examples include (but are certainly not limited to):

  • Whether or not to accelerate income (where possible) and realize long-term capital gains
  • Reconsidering deferred compensation elections
  • Roth IRA conversions
  • Improving asset location — placing tax-inefficient assets in tax-deferred accounts and vice-a-vera
  • Reviewing the financial implications of changing your primary residence to a lower-tax state if you are considering doing so
  • Wealth transfer strategies to take advantage of the currently high estate tax exemption amount, which if not changed sooner (it is not currently part of the proposals put forth), will “sunset” and revert lower after 2025.

The above are only examples of the types of strategies you may want to discuss with your advisors and are not appropriate for every individual. And as you consider the various opportunities available to you, it’s important to keep one guiding principle in mind: Let your definition of success, the purpose and vision behind your wealth, rather than uncertain tax policy, drive your decisions.

6 Meridian is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors. All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. 6 Meridian and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. 6 Meridian and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice. This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.

Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.


1Based on analysis from Hightower Advisors and Fiducient Investment Advisors as of August 2021. This information is solely for

informational purposes. Readers should do their own research and/or consult their legal, accounting or tax advisors.





5Bloomberg. Davison, L. and Dennis, S. Democrats Release Budget Enabling Biden’s $3.5 Trillion Plan, August 9, 2021. Retrieved from