How Will Federal Income Taxes Change Over The Next 20 Years?

Midpack

Midpack

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Just thought I'd ask this thoughtful group what you're actually planning on long term? And why?

It's a key variable for all of us in long term planning, and it would seem we're on an unsustainable path running $1.5-$2T annual deficits - unless you subscribe to MMT I guess.

PLEASE LEAVE POLITICS OUT OF THIS ENTIRELY.

I've read several Tax Foundation articles, such as Considering Tax Reform Options for 2025 (and Beyond) - but even the most aggressive recommendation does little to curtail recent deficits.

I welcome spending reductions but I don't see how we can avoid tax increases over and above inflation over the next 20 years, and I am planning accordingly.
 

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I'm waiting to see what happens this year. Right now I have no plans on future taxes, as it is just too early. Every time I believe that the tax brackets are as low as they can possible go, they seem to be lowered ever further.
 
Honestly, I don’t worry about it. We just do the best we can each year.

We are already subject to a few high tax thresholds, and if it gets worse I don’t think it will make much difference in terms of our lifestyle. (Knocking on wood)
 
For most planning I go with what is known right now, today. That is, I know what the tax structure looks like in 2025 and I know that some of the tax laws will sunset at the end of 2025 if congress doesn't do something that the executive branch signs off on. If they don't so something, then I make no changes. If they do, I'll change my assumptions at that time and keep going.

Cheers.
 
My own very inexpert opinion is that personal tax rates will remain steady over at least the next four years, and then will begin to rise in the following 4-8 years. I honestly don't see how we as a nation can avoid raising personal tax rates significantly over the long-ish term (15-30 years from now). As usual, there will be lots of tinkering around the edges and kicking the can down the road until push comes to shove, but who knows exactly when that will be.
 
I don't expect them to go down. One does have a certain amount of control by modulation one's income but that can get dicey. Not true on property taxes where your home's value--and thus property tax--continues to climb with no ability to change it.

A good tax accountant can often prove invaluable with the Feds.
 
I assume that taxes will stay the same until they don't. I try to spend most of my planning on the near future and just remain flexible for things further out in time. I do not see the benefit of putting much effort into things more than 5 years away. Too many things can change. I have a rough outline for the next 40 years, but I doubt it will play out that way.
 
Not really thinking about it much anymore.
 
I'm planning on an increase in taxes as there appears to be no inclination to reduce spending at the Federal level. Many programs are automatically increased due to inflation resulting in even higher costs while the tax brackets and standard deduction tax less income resulting in less money available for the spending programs.

I also belive that at some point the USD will lose reserve currency status resulting in much higher interest rates to pay our debt as it is rolled over - again leaving fewer funds available for the spending programs which will require higher taxes - although higher taxes may not increase the net amount available for spending.

I suppose it will be interesting to wait and see what the DOGE comes up with and what, if any, of those recommendations are actually implemented.
 
Unless Congress takes action, many of the 2017 TCJA provisions will sunset after tax year 2025, including the individual brackets and standard deduction. This article discusses many of the things that will revert back. Tax planning for the TCJA’s sunset

At best, I would plan for this contingency, given Congress' well known inability to accomplish anything and our actual knowledge of what the reversions will be if they do nothing. But beyond that, who knows?
 
Midpack said:
Just thought I'd ask this thoughtful group what you're actually planning on long term? And why?

It's a key variable for all of us in long term planning, and it would seem we're on an unsustainable path running $1.5-$2T annual deficits - unless you subscribe to MMT I guess.

PLEASE LEAVE POLITICS OUT OF THIS ENTIRELY.

I've read several Tax Foundation articles, such as Considering Tax Reform Options for 2025 (and Beyond) - but even the most aggressive recommendation does little to curtail recent deficits.

I welcome spending reductions but I don't see how we can avoid tax increases over and above inflation over the next 20 years, and I am planning accordingly.
Click to expand...

So what are you planning to deal with this?
 
Gumby said:
Unless Congress takes action, many of the 2017 TCJA provisions will sunset after tax year 2025, including the individual brackets and standard deduction. This article discusses many of the things that will revert back. Tax planning for the TCJA’s sunset

At best, I would plan for this contingency, given Congress' well known inability to accomplish anything and our actual knowledge of what the reversions will be if they do nothing. But beyond that, who knows?
Click to expand...
Taking a look at this, I will actually come out better if TCJA is allowed to sunset.

Flieger
 
Gumby said:
Unless Congress takes action, many of the 2017 TCJA provisions will sunset after tax year 2025, including the individual brackets and standard deduction. This article discusses many of the things that will revert back. Tax planning for the TCJA’s sunset

At best, I would plan for this contingency, given Congress' well known inability to accomplish anything and our actual knowledge of what the reversions will be if they do nothing. But beyond that, who knows?
Click to expand...
This is pretty much how I look at the subject. At least we have historical data to make plans against assuming that the sunset takes place. making assumptions on what might change is just that, assumptions.
 
Midpack said:
Just thought I'd ask this thoughtful group what you're actually planning on long term? And why?

It's a key variable for all of us in long term planning, and it would seem we're on an unsustainable path running $1.5-$2T annual deficits - unless you subscribe to MMT I guess.

PLEASE LEAVE POLITICS OUT OF THIS ENTIRELY.

I've read several Tax Foundation articles, such as Considering Tax Reform Options for 2025 (and Beyond) - but even the most aggressive recommendation does little to curtail recent deficits.

I welcome spending reductions but I don't see how we can avoid tax increases over and above inflation over the next 20 years, and I am planning accordingly.
Click to expand...
All they need to do is freeze the tax brkts instead of inflation adjustment like they do for Social Security taxation. No one seems to complain about that so why not try that on the puppets to see if they squeal. Eventually everyone would be paying some income tax and problem solved- except pandering for votes.
 
Flieger said:
Taking a look at this, I will actually come out better if TCJA is allowed to sunset.

Flieger
Click to expand...
We probably would too - we have lots of Schedule A deductions we could take and alternating years to double up on property taxes and charitable deductions worked well for us before TJCA.
 
For long range planning I always assume the status quo continues indefinitely. I also assume the longest term average I can find for things that bounce around like inflation and market returns.

I think Congress will change the tax laws this year but I don't have any idea what those changes will be. Once I know the new law (assuming it is enacted), I'll update my spreadsheets to them.

I accept the fact that changes will happen, and I'll try to optimize each year based on the above assumptions. So even if my past predictions were wrong I hope that adaptive planning will leave me with an adequate result.
 
I believe that the sunset of tax laws will not happen and there will be some sort of change this year.
Not too concerned about it currently.
 
I don’t worry about it.

I want around 120k/year and most/all of that will come from tax deferred accounts. Effective tax rate with 24% marginal tax rate is 18% and with 28% marginal tax rate it’s 22%. A 4% difference, almost 5k. I can think of better ways to spend 5k, but overall it’s not that much.
 
I think rates will have to go up. I also think we’re on a path to having to implement stringent austerity measures in terms of government spending. I’m amazed at how long the deficit spending has gone on and at some point, the piper will need to be paid. Our current pattern is unsustainable and I’m not optimistic that any type of soft landing will be had.

Saying that, I’m not sure there’s much I can do but maintain my LBYM framework and hope I’ll be better off than a lot of folks when the stuff does hit the fan.
 
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