Biden Tax Plan Spares Most - For Now

President Biden's $3.5 trillion Build Back Better package was cut back to $1.75 trillion as a result of opposition to the original plan, and many of the accompanying taxes, by moderate Democrats. While the country's fiscal challenges remain significant, including coming insolvencies for Medicare (2026) and Social Security (2033), and a ballooning National Debt (nearly $29 trillion), the short-term winners of this compromise are Americans earning less than $10 million. That's most of us, folks.

Prior to the compromise, key tax and financial planning strategies such as Roth Conversions and Back-Door Roths were in danger of being eliminated, along with many popular estate planning concepts that protect inheritances. The bill that is expected to be enacted into law will also remove the proposed increase of the top tax bracket to 39.6% and the proposed top rate of 20% on investment income. Instead, taxpayers earning more than $10 million will pay an additional 5% income tax, and those earning $25 million or more will pay an additional 8%. According to the Wall Street Journal, the number of Americans with an adjusted gross income of more than $10 million is just 22,112, out of a total U.S. population of 333,569,543, as of October 29th.

Taxes will eventually increase to save Medicare, Medicaid and Social Security, to fill the budget deficit gaps, and to pay the increasing interest on our National Debt. In fact, on January 1, 2026, middle income earners in the 12%, 22% and 24% tax brackets will see increases to 15%, 25% and 28% when the 2017 Tax Cuts and Jobs Act expires. Those earning income or withdrawing funds from retirement accounts will be happy, for now, that they will likely see no increase in their tax rates. And financial planners and estate planning attorneys will be pleased that they can continue to help their clients find ways to minimize taxes for themselves and/or their heirs. For now.