There are several steps that advisors should be taking or at least discussing with their clients if the tax changes proposed by President Joe Biden and the Democrat-led Congress become law, according to tax experts at Orion Advisor Solutions and Renaissance Macro Research.
Because most of the tax changes would hit those who earn more than $400,000 a year and own the most assets, ultra-high-net-worth investors, in particular, are feeling anxiety over the proposed changes, according to Orion. Many of them are also exposed to many years of deeply embedded capital gains.
The potential tax changes also have implications for the M&A climate as advisors seek out deal partners, according to Orion.
During the webinar “Let’s Talk Higher Taxes: The Policy Debate Heats Up” on Thursday, Steve Pavlick, head of Washington Policy Research for Renaissance, provided a few predictions on what tax policies will change and what won’t, and how it stands to affect the economy, markets and clients’ portfolios.
For example, Democrats likely won’t raise taxes on individuals earning less than $400,000 — which would break a key campaign promise — and they may raise the threshold at which joint filers see a tax hike, Pavlick said.
Pavlick also said it “would be hard to remove … altogether” the cap on state and local tax (SALT) deductions that was included in the 2017 tax overhaul because that would make it harder for Democrats to find the revenue they need for their proposed programs. “A more likely scenario” would be increasing the cap from $10,000 to $15,000, he said.
In the gallery above are what Andy Rosenberger, head of Tax Managed Solutions at Orion, called the Top 10 Actionable Steps for a Higher Tax Environment.