Republicans Release Tax Plan to Help on Inflation?

Republican leaders released a plan on June 14 to supposedly help reduce inflation. The Middle-Class Savings and Investment plan has several proposals that would help save taxes for many farmers as follows:

• Raise the zero percent capital gains tax bracket from the current top of the old 15% tax bracket (about $42,000 for singles and $84,000 for couples) to the top of the current 22% tax bracket. This would make about a doubling of the amount that could be tax-free. This would certainly help those farmers with C corporations get some of the retained earnings out tax-free.
• Make the first $300 ($600 for married couples) of interest income tax-free. My memory is that some interest income was tax-free many years ago but did not last long.
• Raise the imposition of the 3.8% net investment income tax for married couples from $250,000 to $400,000 and make it and the $200,000 single level subject to an inflation adjustment.
• Increase the savers tax credit by 25% for those lower income taxpayers who contribute to an IRA or other pension plan.

To help pay for the changes, the Act would extend the $10,000 SALT limit for an additional three years. This would raise taxes by about $250 billion over the three year period.

Since the Act would encourage savings, it would take some spending out of the economy which could reduce inflation, however, the impact would likely be minimal.

This will not pass this year but if the Republicans regain both the House and the Senate this fall, it is likley that an Act like this may pass but President Biden may decide to veto it. We will keep you posted.