Three tax proposals targeting the rich that the new Congress could revive

In April, Wyden and Sen. Angus King, I-Maine, introduced a bill eliminating the preferential tax treatment of carried interest, a popular Wall Street tax break. Under current law, fund managers can have a share of a fund's profits taxed at the lower capital-gains rate if the investments are held for at least three years. The Ending the Carried Interest Loophole Act would tax investment profits as ordinary income and also require fund managers to recognize and pay tax on deemed compensation annually, rather than deferring taxes until the fund realizes income.

Lawmakers on both sides of the aisle have proposed changing the taxation of carried interest for nearly two decades, according to Holland & Knight partner Joshua Odintz, a former tax counsel at the Department of Treasury and the Senate Committee on Finance. President Trump repeatedly criticized the provision, saying during his 2016 presidential campaign that it was "unfair to American workers."

Odintz said he expects more scrutiny of carried interest as Congress faces pressure to shore up the Social Security trust fund, which is expected to run out of reserves by the end of 2032. However, he thinks it is more likely that the tax break will be eliminated as part of a budget reconciliation bill rather than a standalone bill.

"I think an issue like carried interest have to be addressed in the context of a larger tax bill, where it's challenging for members to say, 'No, I'm going to stand up just on this one issue and crater a bill,'" he said. "It's much easier when there are a series of trade-offs, and members can point to the different trade-offs and say, 'Look, I got this. I guess I had to give up that, but on net, this is better for my jurisdiction.''"

Fair Trusts for Fiscal Responsibility Act

Sen. Patty Murray, D-Wash., introduced a bill targeting trusts used to transfer assets while minimizing or avoiding estate and gift taxes. The Fair Trusts for Fiscal Responsibility Act sets a graduated annual tax on trust assets exceeding $50 million, with the rate rising to 3% for assets above $1 billion. It would also create a withholding-credit system: taxes paid each year would be tracked in an account and credited against estate or generation-skipping taxes when assets are later transferred or the trust ends. Any unused credit against estate taxes could be refunded.

"This is something that should be watched because if it gets traction, it would fundamentally change estate planning for ultra-high-net-worth individuals," said David Blum, partner and chair of Akerman's national tax practice group.

Miller said he is skeptical that the bill would pass given how complicated it would be to implement. He thinks it is more realistic that the U.S. would follow the examples of the United Kingdom and Canada and periodically tax assets held in trust every set number of years. In the U.K., an inheritance tax is levied every 10 years, and Canada imposes a 21-year rule on most personal and family trusts.