Will Tax Rates Go Up in Your Lifetime?

The word "permanent" showed up in plenty of headlines after the One Big Beautiful Bill Act passed in July 2025. Despite what that wording implies, all it really means is that the current brackets have no built-in end date. Congress can rewrite tax rates any time it passes a new bill, and over a retirement that may last 30 years or more, lawmakers will have many opportunities to do so. Nobody can say for certain whether rates will be higher 10 or 20 years from now. It is possible, though, to look at where rates stand now and what is already set to change, along with the budget pressures that will shape future decisions.

What did the One Big Beautiful Bill Act change, and how long could it last?

The law removed the expiration date on the seven federal tax brackets that began with the 2017 Tax Cuts and Jobs Act. Without that change, the 12% bracket would have become 15% and the 24% bracket would have become 28% starting in 2026.

Tax rates have a history of moving faster than people expect. After the Tax Reform Act of 1986, the top federal rate fell from 50% to 28% in 1988. Congress then raised it twice, and it was back up to 39.6% by 1993.

Some parts of the 2025 law are also temporary by design. The additional $6,000 deduction for people 65 and older applies only to tax years 2025 through 2028 and phases out above $75,000 of modified adjusted gross income for single filers and $150,000 for joint filers. A married couple who both qualify can deduct up to $12,000 extra each year, and unless Congress extends it, the benefit ends after 2028.

How do today's tax rates compare with history?

Today's top federal rate is 37%. According to IRS historical data published by the St. Louis Fed, the top rate was 94% in 1944 and stayed at 91% or higher from 1951 through 1963. It sat at 70% for most of the years between 1965 and 1980 and did not drop to 50% until 1982.

Very few people actually paid those rates. The top rate applied only to very high incomes, and deductions looked very different back then, so most households paid far less than the rate suggests. Still, current rates sit near the low end of the past 80 years. The biggest jumps came when the government needed revenue quickly, during World War I, the Great Depression, and World War II, which is one reason today's debt levels get so much attention.

Why does the federal budget matter for future taxes?

In the fiscal year that ended September 30, the federal government spent $2.0 trillion more than it collected. Total federal debt, which is the running total the government has borrowed to cover its deficits and still owes, has now passed $40 trillion.

The outlook from here is not much brighter. The Congressional Budget Office's February 2026 report projects annual deficits growing to $3.1 trillion by 2036. During that time, the debt owed to outside investors is expected to grow faster than the economy itself. The CBO projects it will set a new record around 2030, topping the 106% of annual economic output reached just after World War II, and climb to 120% by 2036. At that point, the government would owe more than the entire U.S. economy produces in a year. Net interest costs alone are projected to roughly double, from $1.0 trillion in 2026 to $2.1 trillion in 2036.

The CBO separately estimated that the One Big Beautiful Bill Act will add $4.1 trillion to deficits from 2025 through 2034 once higher interest costs are included. In its February outlook, the agency also estimated that higher tariffs would reduce deficits by about $3 trillion over a similar period.

None of this guarantees higher taxes. Lawmakers could narrow the gap with spending cuts, new revenue, or a mix of the two, and stronger economic growth would also help. The budget picture does make it reasonable to plan for higher rates rather than assume today's will hold for 30 years.

What about Social Security?

Social Security has a funding deadline of its own, and it can shape one of the biggest choices retirees make: when to claim benefits. The 2026 Social Security Trustees Report projects that the retirement trust fund can pay full benefits until 2032. After that, incoming payroll taxes would cover about 78% of scheduled benefits unless Congress acts.

The Trustees describe the choices plainly. Lawmakers can raise the payroll tax rate or the cap on taxable wages, lower benefits for some or all recipients, or combine those approaches. Pre-retirees who are still working would feel a payroll tax increase in every paycheck, while retirees would be more exposed to any change in benefits.

How can retirees plan when no one knows where rates are headed?

The most practical answer is tax diversification, which means holding savings in accounts that are taxed differently. Pre-tax IRAs and 401(k)s are taxed as ordinary income when money comes out, while Roth accounts are generally tax-free in retirement. Taxable brokerage accounts fall somewhere in between, with gains and qualified dividends often taxed at lower capital gains rates.

Consider a couple with $5 million saved entirely in pre-tax accounts. Every dollar they withdraw will be taxed at whatever rates apply in that future year, and required minimum distributions will force withdrawals starting at age 73 or 75, depending on birth year. If rates rise, they have very few ways to respond. A couple with the same $5 million spread across pre-tax, Roth, and taxable accounts can decide each year which account to draw from based on the tax picture at the time.

The years between retirement and the start of Social Security or RMDs are often the best window to build that flexibility. Income tends to be lower in those years, which can make partial Roth conversions attractive. Conversions also raise the income Medicare uses to set premiums two years later, so they should be sized with IRMAA thresholds in mind. For people 65 and older, the temporary $6,000 deduction adds another variable through 2028, since conversion income can shrink or eliminate it.

What should pre-retirees and retirees do now?

Because no one can know where rates will be in the future, Oasis assumes for planning purposes that they will rise over time. Aside from health care, taxes are among the largest expenses retirees face, and for many households they are the largest. Assuming today's rates will hold for decades could understate a household's lifetime tax bill and make a plan look stronger than it really is. Building in higher rates gives a more conservative picture and shows where moves like Roth conversions or a different withdrawal order can make the biggest difference.

Timing matters as much as the assumption. Most of the tools that lower lifetime taxes need several years to work, and ideally the groundwork starts during the working years. Someone who saves only to pre-tax 401(k)s and IRAs until retirement, and only then starts tax planning, has far fewer options than someone who also built Roth and taxable savings along the way. Waiting for Congress to act can backfire too, since the chance to move at today's rates may be short or already gone by the time a new law passes.

That is also why the most valuable tax planning doesn't always show up as a smaller bill this April. A move that adds some tax now, like a well-sized Roth conversion, can still reduce the total paid over a 30-year retirement. Oasis Wealth Planning reviews each client's tax situation every year with that longer view in mind, including Roth conversion opportunities, the order of withdrawals, and Medicare premium thresholds. For anyone wondering how a higher-tax future would change their own retirement, an Oasis advisor can run those numbers and point to the steps worth taking now.

This article is for educational purposes only and is not tax or legal advice. Projections cited are estimates from government agencies and may change.