The Tax Conversation Is Changing. Are You Ready?

Some of the most important signals about your future taxes may not come from the next tax bill or the next election. They may come from something quieter: people from very different political backgrounds agreeing that the country’s fiscal path cannot continue indefinitely.

Rahm Emanuel and Anthony Scaramucci are not usually placed in the same sentence as policy allies. Emanuel is a former Democratic congressman, White House chief of staff, and Chicago mayor. Scaramucci is the founder of SkyBridge Capital and a former communications director in President Donald Trump’s White House.

Different backgrounds. Different politics. Different policy preferences.

But both are publicly raising the same larger concern: America’s borrowing, deficits, and rising interest costs are becoming too large to ignore. And both are talking about solutions that involve difficult choices rather than simply pushing the bill further down the road.

That matters for your financial plan.

For years, the federal government has spent more than it collected. It has added new programs, expanded benefits, fought wars, supported allies abroad, and reduced taxes at different points along the way.

Many of these decisions involved legitimate priorities. Veterans need care. Seniors need health coverage. Families need support. National security matters.

But the math still matters.

When spending and promised benefits rise faster than tax revenue, the government must borrow more. Then it must pay interest on the borrowed money. If it continues borrowing to cover the gap, the interest bill grows too.

That is how a manageable problem can become an expensive one.

The Congressional Budget Office projects a federal budget deficit of approximately $1.9 trillion for fiscal year 2026. It also projects annual net interest costs of about $1 trillion in 2026, rising to roughly $2.1 trillion by 2036.[finance.yahoo][cbo]

Think about that for a moment. Interest is not a new benefit. It is not a new road, school, defense system, prescription drug benefit, or retirement check. It is the cost of paying for yesterday’s borrowing.

That is why leaders who care about long term fiscal policy are beginning to speak more directly.

Rahm Emanuel’s Message

Rahm Emanuel recently argued that Washington needs to revisit the bipartisan spirit of the 1986 tax reform effort.

His point was not simply that taxes should go up. His argument was that the tax code has become crowded with special preferences, deductions, exclusions, and loopholes that make the system more complicated and reduce revenue.

Emanuel specifically called attention to tax expenditures, which are tax breaks built into the tax code. These include deductions, exclusions, preferential tax rates, and credits. He estimated that these provisions will reduce federal revenue by approximately $2.3 trillion this year.[wsj]

His proposed direction includes:

1. Reviewing and limiting certain tax breaks
2. Reducing opportunities to borrow against appreciated assets without recognizing taxable gains
3. Reconsidering stepped up basis at death
4. Revisiting carried interest treatment
5. Limiting offshore profit shifting
6. Moving capital gains tax rates closer to ordinary income tax rates
7. Combining tax reform with spending discipline

You may agree with every proposal, some proposals, or none of them. That is not the central point.

The central point is that a prominent Democratic leader is saying that the federal government cannot solve its fiscal problems by pretending they do not exist.

Anthony Scaramucci has raised a similar concern from a different perspective.

Scaramucci has warned that rising debt and higher interest costs may force Washington to make difficult choices. He has pointed to projections showing that the federal government could face dramatically higher borrowing costs if interest rates stay elevated.

His suggested approach is not identical to Emanuel’s. He has discussed a mix of tax increases and spending reforms, including:

1. Restoring a higher top individual income tax rate for higher income households
2. Raising the corporate income tax rate
3. Taxing gains at death
4. Changing carried interest treatment
5. Applying payroll taxes to more income
6. Considering a value added tax, paired with rebates for working families
7. Adjusting Medicare and prescription drug spending
8. Gradually increasing the retirement age for younger workers

Scaramucci’s message is blunt: there is no free lunch. Borrowing may delay a hard choice, but it does not eliminate it.

The important story is not whether Rahm Emanuel and Anthony Scaramucci agree on every detail. They do not.  The important story is that people from opposite political traditions are acknowledging the same basic reality:

The country cannot keep making larger promises, collecting insufficient revenue, and borrowing indefinitely without consequences.

Eventually, Washington may have to choose among higher taxes, fewer tax breaks, reduced benefits, slower spending growth, higher borrowing costs, inflation, or some combination of those outcomes.  For families, the practical risk is not only a higher tax rate. It is a financial plan that assumes today’s rules will last forever.

Future legislation could affect more than the number printed on a tax bracket chart.

Possible changes could include:

1. Higher income tax rates
2. Higher taxes on capital gains or dividends
3. Fewer deductions and exclusions
4. New limits on estate planning strategies
5. Changes to inherited IRA rules
6. Higher payroll taxes
7. Changes to Medicare premiums or benefits
8. Changes to Social Security taxes or benefits
9. A new consumption tax, such as a value added tax
10. Higher state and local tax burdens if governments face similar pressures

No one can know which changes will happen or exactly when they will arrive. But assuming no changes is not a strategy.

Here is the good news: clients do not need to predict Congress to prepare for change.

A strong financial plan can test several future tax scenarios. It can model what happens if tax costs rise by $5,000, $10,000, or $20,000 per year. It can identify years when income may be lower and planning opportunities may be better.

Some strategies worth reviewing may include:

1. Partial Roth conversions during lower income years
2. Coordinated withdrawal strategies across taxable, tax deferred, and tax free accounts
3. Tax aware investing and asset location
4. Charitable giving strategies
5. Capital gain and concentrated stock planning
6. Estate and gifting strategies
7. Business succession and entity planning
8. Reviewing how required minimum distributions may affect future tax brackets

The goal is not to guess the next tax law. The goal is to avoid building a retirement plan that has only one answer if tax policy changes.

Kicking the can down the road feels painless. That is why governments do it. It avoids hard choices today.

But the can gets heavier with every mile.

Eventually, higher debt can mean higher interest costs. Higher interest costs can mean fewer dollars available for programs and services. And fewer available dollars can increase pressure for higher taxes, reduced benefits, or both.

Leaders such as Rahm Emanuel and Anthony Scaramucci may disagree about the exact solution. But they are doing something many policymakers avoid: acknowledging that the problem exists and offering specific ideas to address it.

That should be a signal for households, retirees, business owners, and investors.

The best time to prepare for changing tax rules is before the rules change. Schedule a meeting to stress test your financial plan, evaluate your long term tax exposure, and identify the planning opportunities available today.

This article is for educational purposes only and is not individualized tax, legal, or investment advice. Tax laws, benefit rules, and individual circumstances can change. Consult qualified tax and legal professionals before implementing any strategy.

Congressional Budget Office, The Budget and Economic Outlook, 2026 to 2036[finance.yahoo]
https://www.cbo.gov/publication/62105

Congressional Budget Office, Director’s Statement on the Budget and Economic Outlook: 2026 to 2036[cbo]
https://www.cbo.gov/publication/62050

Rahm Emanuel, Washington Needs the Tax Reform Spirit of ’86, The Wall Street Journal[wsj]
https://www.wsj.com/opinion/washington-needs-the-tax-reform-spirit-of-86-bbc2ee5e

Anthony Scaramucci, Anthony Scaramucci Warns U.S. Debt Could Hit $56T by 2036, Yahoo Finance[finance.yahoo]
https://finance.yahoo.com/economy/policy/articles/anthony-scaramucci-warns-u-debt-120008753.html