It’s started! Tax Policy Season is officially open! The Season was officially opened March 24 when Senator Bernie Sanders offered two bills to Congress for their consideration:
• Corporate tax rates: Repeals the “Trump” rates which were lowered to 21%. Institutes a compensation ratio tax which is levied upon the relationship between CEO and median worker pay. The compensation ratio tax would apply to both public and private companies with revenue in excess of $100M.
• “Progressive” estate tax: Installs a tiered tax rate from 40% to 65%, separates the gift exemption from the estate exemption, and lowers the estate exemption to $3.5M. The most costly impact for most of our clients will be the separation of the gift exemption, lowered to $1M. Reducing your estate through gifts to related individuals will therefore be taxed once the total of lifetimes gifts exceed $1M. Also included in the Sander’s bill is a claw-back provision. Claw-back results when a gift is made when the estate limit is higher than when you pass-away. If you give away to family $11.5M when that is the estate exemption, but pass-away when the exemption is $5M you’d owe the tax on $6.5M given away legally previously. No estate law has ever contained this provision.
Neither of these bills are expected to gather much steam, however, components in both bills could eventually become law.
I believe whatever passes will be effective with the effective date of the bill, but not retroactive. I’ve called 2021 The Year of the Plan. If you are planning, it’s time to accelerate the plan. The Season has started earlier than I anticipated, so we could easily have new law in June.
