2021 is well on its way. It is hard to believe that February is here already. We may be thankful to see 2020 in the rearview mirror, but what has actually changed? As the new president settles into his office, it's a great time to review what type of legislative support would be needed to pass certain policy proposals that may come forward from his administration.
Keep in mind that legislative changes take time, and it remains unclear what initiatives may take priority in the months ahead, especially with the ongoing pandemic.
It would also be foolish to think that the 117th United States Congress won't move forward with some new ideas and proposals. As has been said, "Elections have consequences."
Let's take a closer look at some of the policy proposals:
Repealing the 2017 Tax Cuts and Jobs Act
This could have the most direct impact. Reversing the tax cuts would cost the typical American family of four earning the median income of $73,000 about $2000. A repeal could also lead to many businesses dialing back plans to raise wages and add jobs, and many would have to cut back in both areas. This type of legislation would need the approval of the House of Representatives and 51 Senate votes.1
Increasing capital gains taxes
While the Biden plan may raise capital gains taxes only for those making over $1 million a year, it could have an effect on the market in general if people with high incomes decide to sell stocks with a large capital gain before the law takes effect. Legislation of this nature also would need the approval of the House of Representatives and 51 Senate votes.1
Providing additional fiscal stimulus
Of course, stimulus checks do have a positive effect on economic activity in the short run. However, while we still don't know the real long-term cost of the unprecedented federal spending, one thing we do know is that it could drive up inflation in the coming years, leaving Americans with less purchasing power over time. For this type of measure, legislation would need to move through the House and get 60 Senate votes.
If any one of these proposals makes it to the president's desk, they could impact the economy and your finances. This is why it is important to review your financial plan on a regular basis. If you are concerned about one or more of these potential policy initiatives, please give us a call. We'd welcome the opportunity to hear your perspective and provide some guidance.
1. WStreet.com, January 8, 2021
This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your overall tax strategy.
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