Will We Experience Immediate Federal Tax Increases?

With the Presidency, the House and the Senate all controlled by the Democratic Party, many taxpayers are asking, “Will we have tax increases for 2021?” We are still too early in the Biden administration to predict an answer to that question with any confidence, but at least one early indication is that tax increases are likely not a top short term priority for the Biden administration.

Mark Mazur, recently appointed as the Deputy Assistant Secretary for Tax Policy, Office of Tax Policy, in the Department of Treasury, made some relevant observations on January 26 at the  American Bar Association Section of Taxation Virtual 2021 Midyear Tax Meeting. Mr. Mazur indicated that given the present state of the economy, the enactment by Congress of revenue raisers in the short run is unlikely. In the longer run, Mazur indicated that Treasury and administration officials will consider revenue-raising policies even if they are not politically popular. It is not known where the line of demarcation between short run and longer run lies in Mr. Mazur’s comments.

Mr. Mazur was also asked about the possibility of retroactive tax increases if the administration made some of the tax policies laid out in President Biden’s campaign proposals a priority in 2021.  Mr. Mazur’s reply was that the question was tough to answer, but he did observe that having tax increases apply retroactively is not normally the first choice. He did, however, note that retroactive tax increases have been made in the past; in such cases, he noted the earlier in the year the provision is enacted, the better.

The immediate focus of the Biden administration is handling the coronavirus outbreak and securing additional financial relief for struggling taxpayers. Tax increases are not at the top of the administration’s priorities, but would seem to be a necessary component of the overall policy of  funding the costs of coronavirus relief under both the prior and current administrations. Stay tuned  for additional updates as they develop.