How Joe Biden’s Presidency Could Impact Your Money
Taking a closer look at your financial base Amid the headwinds of a pandemic, it’s a great time to consider the possible impact of a Joe Biden presidency on money matters.
The balance of Congress shifted in the wake of the Georgia runoff, potentially giving President Biden’s agenda a boost.
A new COVID check, taxes, health care – it’s all on the line. Here’s how.
A SHORT FUSE ON ANOTHER SERIES OF STIMULUS CONTROLS
Look for another round of pandemic relief soon after Biden’s inauguration, says Bernard Yaros Jr., economist at Moody’s Analytics.
“In February, we expect there will be a specific COVID relief plan,” Yaros said. The move will likely extend unemployment insurance benefits again, with sufficient support for another round of checks issued to Americans, “be it 2K or slightly less,” he said.
Small businesses are also likely to receive more grants and forgivable loans.
“And we also think you will probably get some extra money for rent assistance,” Yaros adds.
MOVING FROM RELIEF TO STIMULUS
With Democrats winning two Senate seats thanks to Georgia’s second round, there is now a greater possibility of switching from “relief” to “stimulation” mode at the end of 2021.
“It’s because now Democrats have a simple majority in the Senate. They can pass tax code changes as well as implement changes in spending,” Yaros said.
Moody’s Analytics economists expect the Biden administration to devote increased funding to improving “social safety nets,” including:
– Expansion of Medicare eligibility.
– Retooling of Obamacare in Bidencare.
– Deployment of protections against paid sick leave.
– Offering universal pre-K for ages 3 and 4.
– Offer some kind of student debt relief.
But on these initiatives, Democrats “will have to choose,” Yaros said.
“Among the more moderate Democrats, they will not want to increase the deficit too much. This is obviously going to be a limiting factor,” he adds.
And while Vice President Kamala Harris holds the deciding Senate tie vote, the 50-50 split between Democrats and Republicans does not constitute filibuster-proof power.
REVERSE Trump’s TAX REDUCTIONS
Higher taxes should partly finance the expansion of these social safety nets.
Yaros says Biden will likely succeed in reversing Trump’s tax cuts, raising the corporate tax rate to 28%, raising the tax rate on taxable income over $ 400,000, and eliminating some relief tax for those who earn more than a million dollars.
But the tax hikes could be smaller than expected, according to Michael Zezas, head of U.S. public policy research at Morgan Stanley.
“In a Senate where Democrats have the thinnest possible majority, any Democratic senator does indeed have a veto. And when it comes to taxes, we expect that many taxes proposed by the Biden administration will not be not accepted by moderate Democrats, ”Zezas said. in an analysis.
“We estimate that around $ 500 billion in tax increases are possible, obviously a number less than another potential COVID stimulus round, and also less than the more than $ 1 trillion spending currently at stake for each. health care and infrastructure, ”Zezas added.
Even though Biden can rock the tax hikes, they are not expected to go into effect until 2024, says Yaros, “to make sure there is no tax drag at all. on the economy over the next two years, while we are still emerging from the pandemic. “
REVIEW PENSION PLANS
Joe Biden also has some ideas for reshaping employer-sponsored pension plans.
One of these proposals is to equalize the tax advantage of contributing to a pension plan so that “high-income earners do not receive more benefits than low-income workers, which is the norm. at all levels, ”explains Anne Tyler Hall. , founder and director of Hall Benefits Law.
For example, someone in a 37% tax bracket can deduct the full amount of a contribution to a pension plan; therefore $ 37 for each contribution of $ 100 before taxes. That’s a bigger tax benefit than someone in a lower tax bracket, like 20%, who would receive a $ 20 deduction for every $ 100 pre-tax contribution.
The idea proposed by the Biden administration is to offer a tax credit to low and modest income workers, resulting in an equal tax benefit.
Democrats are also pushing for employers to make retirement savings easier for the U.S. workforce.
“Employers that don’t offer retirement plans would be required to allow employees to contribute to individual retirement accounts, IRAs,” Hall said. “Contributions to IRAs would come directly from paychecks.”
With the shift in balance in Congress, Hall says such shifts may be more likely. In addition, “some of these provisions enjoy bipartite support,” she adds.
Georgia is a game changer https://www.morganstanley.com/ideas/thoughts-on-the-market-zezas
Budgeting 101: How to Budget Money http://bit.ly/nerdwallet-budget-101