Townsend said he is also watching closely to see if there is any movement on the state and local tax (SALT) deduction cap. "Representatives from both parties, especially in states like California, New York, New Jersey, Massachusetts and Illinois, which have been overly impacted by the $10,000 cap, are pushing really hard to eliminate or raise [it],” Townsend said.
The optics of raising the SALT cap, however, may not be palatable to a Democrat White House that aspires to be seen as ushering in progressive tax policy.
“From a [public relations] perspective, it’s a really difficult place for the White House to be because of course the benefit would go to wealthier filers and that is something they’re trying to pull back against,” Townsend said.
It’s important for advisors and investors to understand that the president’s proposals are just proposals, he added. “Congress is going to have to turn these into legislation and figure out what is achievable to get these changes through a narrowly divided House and a 50-50 Senate,” Townsend said. “There are at least a dozen committees that are going to be involved with this process and it’s going to take weeks and weeks and weeks. They haven’t even decided whether to combine this into one giant bill or to break it into smaller bills. We’re at the front end of the process to put this together.”
At the end of the day, whether Democrats are able to enact any of Biden’s tax proposals, even using reconciliation requiring Vice President Kamala Harris to cast the deciding vote in the Senate, remains to be seen, the veteran lobbyist added. “We don’t even know if these are going to get through. We have a lot of dissension from Democrats on these proposals and a lot of changes are likely to happen,” Townsend said.