What the “American Families Plan” Could Mean for You

A key focus of President Biden’s address to Congress last night was his proposed “American Families Plan.” Among many things, the plan includes new spending on what the administration describes as “human infrastructure” priorities. These include things such as paid family and medical leave, universal child care, access to pre-kindergarten education, free community college, and nutrition assistance programs, as well as tax relief targeted primarily at lower- and middle-income taxpayers. To offset the cost of the proposed $1.8 trillion initiative, Biden’s plan calls for sweeping changes to tax policy, which starts to really impact those making greater than $400,000 per year. The fact sheet released by the White House yesterday substantially outlines the core components of the package. 

Notably, the plan does not appear to include one of Biden’s most talked about campaign proposals, the return of the estate tax to parameters that were in effect back in 2009 — specifically a top rate of 45 percent and an exemption of $3.5 million per taxpayer. The proposal does, however, call for a repeal of the step-up in the cost basis of inherited assets at death on gains greater than $1 million ($2.5 million per couple when combined with current-law exemptions for real estate) with some exceptions.

Discussions are still in progress on President Biden’s proposal, and given the Democrats’ very slim majority in the Senate (with several moderate Democrats holding significant influence), these tax proposals are far from guaranteed. 

Summary of Key Tax Policy Changes

  • Increase the top individual income tax rate to 39.6 percent for taxpayers “within the top one percent.” The plan does not provide specific income thresholds that would apply for individual filers and married taxpayers filing jointly.
  • Long-term capital gains and certain dividends taxed at ordinary rates for “households making over $1 million.” The proposal fact sheet does not specify if the threshold would apply to taxable ordinary income or investment income.
  • “Permanently eliminate the carried interest loophole.”
  • Repeal the step-up in the cost basis of inherited assets at death for gains greater than $1 million ($2.5 million per couple when combined with current-law exemptions for real estate). Special rules – which are not described in the fact sheet – would apply to protect family-owned businesses and farms that are passed on to “heirs who continue to run the business.”
  • Presumably, it will end the like-kind exchange rules for gains on real property greater than $500,000.
  • Permanently extend the excess business loss limitation, which was recently extended through 2026 under the American Rescue Plan Act of 2021 (P.L. 117-2).
  • Ensure that the 3.8 percent Medicare tax on net investment income enacted as part of the Patient Protection and Affordable Care Act is applied “consistently to those making over $400,000.” The fact sheet does not explain precisely how this proposal would operate.

The plan does not appear to include other notable revenue-raising proposals from Biden’s presidential campaign, such as capping the value of itemized deductions for upper-income taxpayers, reinstating the so-called “PEP” and “Pease” limitations on itemized deductions, or eliminating the 20 percent deduction for pass-through income under section 199A.   

Additional components of the Plan

According to the fact sheet, the administration believes it can narrow the “tax gap” by $700 billion over 10 years through more stringent IRS enforcement of existing tax laws as well as reporting requirements.

To assist, the President proposed increasing the IRS’s budget to augment its audits of high-income individual taxpayers and corporations. In addition, the plan would require financial institutions to “report information on account flows so that earnings from investment and business activity are subject to reporting more like wages already are.”

So, what should you be doing? 

While the proposal is sweeping, the final outcome will likely look different than the proposal in its current form. That said, these proposed changes should serve as a catalyst for clients to initiate discussions with their advisory team around gifting, using up your current gift exemption, strategies to provide optionality around the timing of asset sales as well as undertaking the process of assessing any potential impacts to cash-flows and long-term planning these proposals could have.  


Let’s Talk
John Straus, Jr. 


The views and opinions included in these materials belong to their author and do not necessarily reflect the views and opinions of NewEdge Capital Group, LLC.

This information is general in nature and has been prepared solely for informational and educational purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy.

NewEdge and its affiliates do not render advice on legal, tax and/or tax accounting matters.  You should consult your personal tax and/or legal advisor to learn about any potential tax or other implications that may result from acting on a particular recommendation.

The trademarks and service marks contained herein are the property of their respective owners. Unless otherwise specifically indicated, all information with respect to any third party not affiliated with NewEdge has been provided by, and is the sole responsibility of, such third party and has not been independently verified by NewEdge, its affiliates or any other independent third party. No representation is given with respect to its accuracy or completeness, and such information and opinions may change without notice.

Investing involves risk, including possible loss of principal.  Past performance is no guarantee of future results.

Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No assurance can be given that investment objectives or target returns will be achieved. Future returns may be higher or lower than the estimates presented herein.

An investment cannot be made directly in an index. Indices are unmanaged and have no fees or expenses. You can obtain information about many indices online at a variety of sources including:  https://www.sec.gov/fast-answers/answersindiceshtm.html or http://www.nasdaq.com/reference/index-descriptions.aspx.

All data is subject to change without notice.

© 2022 NewEdge Capital Group, LLC

Stay In Touch


* indicates required
Current NewEdge Wealth Client
What types of updates would you like to receive?

You may also like…

Valuing Your Values

Valuing Your Values

WEALTH PLANNING STRATEGIES Valuing Your Values: A Case Study in Wealth Strategy  At NewEdge Wealth, we believe that...