2021 Client Letter | “Georgia On My Mind”
On November 19, 2020, Will Janoush, an associate with our firm, gave a seminar at the Mississippi Society of Certified Public Accountants. Will was asked to present on “The Future of Tax Laws as They Relate to Estate Planning & Business Valuation.” This letter more or less tracks Will’s presentation.
While Will, like most of us, lacks the ability to predict the future, he explained that he was waiting for one date in particular, January 5, 2021, to see what would happen in Georgia. As many of you are aware by now, both of Georgia’s senate races were forced to runoffs that took place on January 5, 2021; and, as of January 6, 2021, both seats flipped to the Democratic party, resulting in a 50/50 split in the United States Senate down party lines.
Via the Congressional Budget Act of 1974, otherwise known as COBRA, Congress provided that, via a process called budget reconciliation, only a simple majority is needed for policies that affect spending and/or revenues. Tax laws fall squarely within this regime. The Vice President of the United States is afforded the ability to cast a tie breaking vote in the event of a 50/50 split.
President Biden has made no secret concerning his proposals for changes to the tax code, among them: taking the top individual income tax rate back to 39.6% from 37% on incomes in excess of $1,000,000; repealing the Qualified Business Income deduction for certain pass-through entities; increasing the capital gains tax rate from 20% to 39.6% for those with incomes in excess of $1,000,000; eliminating “step-up” in basis for capital gains assets at death; capping the tax benefit of itemized deductions to 28 percent of value for those earning more than $400,000 annually; expanding the estate and gift tax by restoring the rate and exemption to 2009 levels (45% and $3.5M, respectively); extending the 12.4% Social Security tax on wages in excess of $400,000; and increasing the corporate tax rate to 28% from 21%.
In light of the foregoing, now may be the time to commence discussing estate, tax, and business planning and start looking at various options. This is especially true if you’re approaching retirement and/or anticipating the sale or transfer of a closely held business.
As always, our firm is here to provide competent advice and to assist in any way we can; and we look forward to the opportunity to be of service.
With kindest personal regards, I am, Very Truly Yours, Harris H. “Trip” Barnes, III