When you take a closer look at your financial situation in the face of a pandemic, this is an excellent time to examine the potential impact of a Joe Biden presidency on monetary matters.
The balance of Congress has shifted after the Georgia runoff elections, potentially boosting President Biden’s agenda.
A new COVID check, taxes, health care – everything is at stake. Here is how.
A SHORT FUSE ON ANOTHER ROUND OF STIMULUS CHECKS
Look for another round of pandemic relief shortly after Biden’s inauguration, says Bernard Yaros Jr., an economist at Moody’s Analytics.
“We expect a COVID-specific aid package in February,” says Yaros. That move will likely extend unemployment insurance benefits again, with enough support for another round of checks to be made out to Americans, “whether it’s 2K or slightly less,” he says.
Small businesses are also likely to receive more grants and unsuccessful loans.
“And we also think that you would likely receive additional funding for rental support,” Yaros added.
Transition from relief to stimulus
With the Georgia runoff election winning two Senate seats for the Democrats, there is now a greater opportunity to move from “facilitation” to “incentive” mode in late 2021.
“That’s because the Democrats now have a simple majority in the Senate. They can pass changes to the tax code and make changes to spending, ”says Yaros.
Moody’s Analytics economists believe the Biden administration will allocate more funding to improvements to “social security nets,” possibly including:
– Enhanced authorization for Medicare.
– Upgrade from Obamacare to Bidencare.
– Introduction of protection against paid sick leave.
– Universal Pre-K for 3 and 4 year olds.
– Providing some kind of debt relief for students.
But in these initiatives, the Democrats have to “choose,” says Yaros.
“Under the moderate Democrats, they will not want to increase the deficit too much. That will of course be a limiting factor, ”he adds.
And while Vice President Kamala Harris has the casting vote in the event of a Senate tie, the 50:50 split between Democrats and Republicans is not a filibuster-safe power.
REVERSING TRUMP TAX CUTS
Higher taxes are expected to partially finance the expansion of these social safety nets.
According to Yaros, Biden will likely manage to reverse Trump’s tax cuts, raise the corporate tax rate to 28%, raise the tax rate on taxable income above $ 400,000, and remove some tax breaks for those who earn more than $ 1 million.
The tax hikes could turn out to be smaller than is widely believed, however, says Michael Zezas, director of US policy research at Morgan Stanley.
“In a Senate where Democrats have the smallest possible majority, every Democratic Senator effectively has a veto. And when it comes to taxes, we expect that many of the taxes proposed by the Biden government will not come together with democratic moderates, ”says Zezas in an analysis.
“We estimate roughly $ 500 billion in tax hikes are possible, obviously a smaller number than any other potential COVID economic round and also less than the more than $ 1 trillion currently being spent on healthcare and the infrastructure incurred, “added Zezas.
Even if Biden can swing the tax hikes, they’re not expected to happen by 2024, says Yaros, “To make sure the economy doesn’t get any financial strain in the next few years we’re still in, we’re digging our way out of the pandemic out. “
REVISION OF PENSION PLANS
Joe Biden also has some ideas for redesigning employer-sponsored retirement plans.
One such proposal is to offset the tax benefit of contributing to a retirement plan so that “higher-income earners do not get more of the benefit than lower-income workers, which is the general standard,” said 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 pension plan contribution. so $ 37 for every $ 100 pre-tax contribution. This is a greater tax benefit than someone in a lower tax bracket, e.g. B. 20%, which would receive a deduction of $ 20 for every $ 100 pre-tax contribution.
The idea proposed by the Biden government is to offer low and middle income workers a tax credit that translates into an equal tax benefit.
The Democrats are also pushing for employers to make it easier for U.S. workers to save in retirement.
“Employers who don’t offer retirement plans would need to allow employees to contribute to individual retirement accounts (IRAs),” says Hall. “Contributions to the IRAs would come straight from paychecks.”
With the shift in the balance in Congress, Hall says, such changes could be more likely. “Some of these provisions are supported by both parties,” she added.
SIMILAR LINKS:
Georgia changes the game https://www.morganstanley.com/ideas/ Thoughts-on-the-market-zezas
Budgeting 101: How To Budget Money http://bit.ly/nerdwallet-budget-101
Hal M. Bundrick of Nerdwallet, The Associated Press
