Whacking the New Tax Surcharge Moles

Tax Regime Change
November 9, 2021

NOTE: This update is based on available public information known as of November 3, 2021. Circumstances may have changed or be changed thereafter.

President Biden recently announced a framework agreement with congressional majority leadership on the Build Back Better legislation.1 The framework includes a significant number of changes when compared to prior tax proposals.

The new moles2

The most relevant proposed changes for certain Aperio clients are a 5% surcharge on modified adjusted gross income (AGI) greater than $10 million and an additional 3% surcharge on modified AGI greater than $25 million.

Additionally, high-income taxpayers with large retirement account balances would face new rules and limitations on retirement contributions, required minimum distributions, and Roth conversions.

What’s not included

Just as important, a significant number of previous tax proposals were omitted from this most recent framework, including the following:

  • Making transfers during life and at death gain realization events
  • Increase in the top ordinary income tax rate
  • Increase in the top capital gains tax rate
  • Billionaire “mark to market” tax regime
  • Decrease in the gift and estate tax exemption
  • Changes to the grantor trust rules

In other words, the tax provisions included in this framework would likely be less severe for many Aperio clients than those in earlier tax proposals.

Things could change

The tax legislative environment remains extremely fluid, and additional amendments to the legislation may be made. Tax proposals now excluded from this framework, including some of those noted above, could still be added. We will continue to monitor the legislative process and provide updates as appropriate.

Until the next mole rears its head …

Other Tax Regime Blogs

Send questions or comments to blog@aperiogroup.com.

1 H.R. 5376, Build Back Better Act.
2 Aperio blog, “Why ‘Whack-a-Mole’ Isn’t a Good Tax Strategy.”

© 2023 BlackRock, Inc. or its affiliates. All rights reserved. BLACKROCK and APERIO are trademarks of BlackRock, Inc. or its affiliates. Other trademarks are property of their respective owners.

This material is provided for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are subject to change at any time without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations.

This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition. Moreover, any historical performance information of other investment vehicles or composite accounts managed by BlackRock, Inc. and/or its subsidiaries (together, “BlackRock”) included in this material is presented by way of example only. No representation is made that any performance presented will be achieved, or that every assumption made in achieving, calculating or presenting either the forward-looking information or the historical performance information herein has been considered or stated in preparing this material. Any changes to assumptions that may have been made in preparing this material could have a material impact on the investment returns that are presented herein by way of example. Past performance is no guarantee of future results.

The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy.