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Financial Planning > Tax Planning > Tax Reform

3 Tax Plans in Play in Congress Now: The Washington Update

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What You Need to Know

  • Lawmakers could move a tax bill before the midterm elections, political analyst Jeff Bush says.
  • Biden, Manchin and Sinema have each laid out tax plans.

While the news this week centered on President Joe Biden’s release of new spending and tax proposals as part of his 2023 budget, there is also “talk in Congress of moving a tax bill before the fall [midterm] elections,” according to Jeff Bush of The Washington Update.

As it stands now, there are three tax plans under consideration by lawmakers.

First, “most of the talk has centered on Biden’s ‘billionaire tax,’ which, despite its name, would apply to taxpayers with over $100M in assets,” Bush wrote Friday in an email note.

Biden’s plan “would impose a 20% minimum tax on income, including unrealized gain on investment assets,” Bush said. “Taxing unrealized gain would prove difficult to administer and might be subject to court challenges.”

Sen. Joe Manchin, D-W.Va., wants to maintain the current tax structure but increase the top tax rate to 39.6% on ordinary income and 28% on capital gains, Bush explained.

Meanwhile, Sen. Krysten Sinema, D-Ariz., rejects an increase in tax rates in favor of a 5% surtax on income over $10 million and an additional 3% (total 8%) surtax on income over $20 million.

There is Democratic support “for other significant tax changes,” Bush states, “including new taxes on small businesses, limits on total assets that may be held in retirement accounts, increased IRS enforcement, and relief from the limitation on the deduction of state and local taxes.”

But overhanging these efforts, Bush said, “are the midterm elections, which have the potential to upend the Washington power structure for the final two years of Biden’s term.”