Tax Reform: 2021 Edition

It’s 2021. COVID vaccines are being administered, the election is over, the electoral college votes have been certified, and the Georgia runoff has been concluded. We know that Joe Biden is the President, the House is controlled by the Democrats, and the Democrats hold a razor-thin margin that depends on a Vice Presidential tiebreaker and complete loyalty from the Democratic caucus. And it’s time for us, as taxpayers, to take stock and consider what tax reform might look like — because tax reform is most assuredly coming in this age of stimulus spending exceeding $5.4 trillion dollars, a projected $2.26 trillion 2021 budget deficit (not including the most recent $1.9 trillion dollar relief package), and a national debt of $26.9 trillion (as of September 30, 2020).

During the 2020 Presidential campaign, President Biden offered numerous possible changes to the tax code including:

This represents a sampling of the tax changes that may come from Washington in the next year or two. Prudence requires constant diligence to keep informed about the discussions and proposals designed to increase revenue so that taxpayers can act before the effective date of such measures. However, taxpayers should keep in mind that there is no legal prohibition against tax measures that apply retroactively. For example, in 2010, Congress passed, and President Obama signed, the Job Creation Act of 2010 on December 17, 2010. Nevertheless, the effective date of most provisions was the first taxable year beginning after December 31, 2009, or in the estate tax context, decedents dying after December 31, 2009. This meant that for some taxpayers, the changes contained in the act went into effect almost a year before the bill became law.

The bottom line is to be diligent, keep in touch with your tax advisors, and continue to watch this blog for updates. If you have questions about this post or any related taxation matters, please feel free to contact me at crgray@norris-law.com.