House Tax Proposal Demands Urgent Action

3 months ago

  • Share this:

By Chris Carns

The House Ways and Means Committee put forth a broad, impactful tax proposal that addresses many of the promises of the Biden administration. If enacted, many of the proposed changes would go into effect on January 1, 2022; however, some would go into effect as of the date of the introduction of the proposal, September 13, 2021.

The proposal requires urgency in financial, tax, and estate planning and includes the following:

  • Increase in Capital Gains Tax Rate– Long term capital gains tax rates would be increased from 20% to 25%.  This change applies to taxable years ending after the date of introduction of the proposal, September 13, 2021. [1] While a 25% increase in the rate, this is much more favorable than the proposal to raise the rate to ordinary income tax rates for those earning more than $400,000 or $1,000,000 per year that had been proposed by multiple legislators.
  • S Corporation Advantage-The Net Investment Income tax would be significantly expanded to apply to all business income for taxpayers with more than $500,000 of income on a joint return or $400,000 for a single individual. [2] This change would eliminate the benefit that using an S corporation structure provides for some small business owners.
  • Estate and Gift Tax Exemption Lowered– Currently, the amount of wealth that can be transferred without any gift, estate or generation skipping transfer tax is $11.7 million. The House proposal accelerates the 2026 reduction back to $5 million per person inflation adjusted from 2026 to 2022.  Therefore, it is estimated that estate and gift taxes would be payable for any transfers in excess of $6.2 million in 2022.
  • Increase in Ordinary Income Tax Rate– The plan raises the top marginal tax rate on individual income from 37% to 39.6% and adds a 3% surcharge on income above $5 million for a married household (or $2.5 million for an individual filer). 
  • Increase in Corporate Tax RateThe proposal would raise the top corporate tax rate to 26.5%, and it would create three tax brackets for corporations: 18% for corporations with under $400,000 in net income, 21% from $400,000 to $5 million in net income, and 26.5% percent over $5 million.

In addition, the proposal affects Section 199A deductions, restricts the use of business losses, modifies grantor trust rules and family entity planning, among other changes. With only a few months left in 2021 and many of the proposed changes becoming effective on January 1, 2022, if enacted, it is important that you review your current assets and estate plan and consult with your advisors to ensure you take advantage of any tax and wealth preservation planning opportunities available now, before it is too late.




February 23, 2021

This material is prepared by Cabana LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) 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. This material may only be distributed in its original format and may not be altered or reproduced without the prior written consent of CabanaThe opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.  

This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.  

Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV, Part 2. A copy of which is available upon request or online at 

Past performance is no guarantee of future results. All investment strategies have different degrees of risk and the corresponding potential for profit or loss. Asset allocation and diversification will not necessarily improve returns and cannot eliminate the risk of investment losses. “Target Drawdown” is merely a descriptive term used to describe the general strategy and objective of the portfolio, it is not a guarantee, nor should it be construed to suggest safety or protection from loss. There is no guarantee that portfolio performance will remain consistent with the targeted drawdown parameter. While risk tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account and there is no guarantee that Cabana’s strategies will be suitable for any investor. Investors and advisors should not simply rely on the name of any portfolio to determine what is suitable. It is the responsibility of investment advisors to determine what is suitable for their clients. Cabana manages assets on multiple custodial platforms. Performance results for specific investors will vary based upon differences in associated costs and asset availability.  

Cabana claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a trademark of the CFA Institute. The CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To receive a GIPS Report and/or a firm’s list of composite/pooled fund descriptions please email your request to

The COVID-19 health epidemic has had substantial global economic impact on financial markets. As of March of 2020, restrictions to travel and business spanning the economy for activities not deemed essential have been imposed throughout the United States. These restrictions have caused unprecedented volatility and uncertainty in capital markets and have negatively impacted the economy. It is unknown how severe the impact to the economy and capital markets will be if the epidemic persists for an extended period of time. The epidemic may have a material adverse impact on Cabana’s investment advisory business including, but not limited to, the performance of our portfolio strategies.  

For additional information regarding our services, including performance disclosures and award methodology, please visit