I like to tell my son – “my turn running the world is over, it’s your responsibility now.”
With Biden now in office, I started looking at what impact the Democratic Party proposals might have on our household. I sold a lot of stock options for cash last year to get ahead of potential changes in tax rates, but that cash will only last so long.
In addition, the new President signed dozens of executive orders in his first two days in the White House across a number of topics. The latest CV19 relief proposal (is this the fourth now?) that he offered is now said to be on its way to Congress.
It’s always a flurry of activity at the beginning of a new administration, but I honestly don’t see any real impact on our household. For all the rancor and buzz that accompanies a change in political control it’s interesting that probably nothing in my life is any different:
– INDIVIDUAL INCOME TAXES – I sold off the last big chunk of MegaCorp stock options I had in 2020, so once I settle the tax bill on those I guess I’ll be in the clear. We’ll still have some income, but less than the impacted ranges shared in this Forbes article on the Biden Tax Plan and detailed in the chart below …
– 401K CHANGES – Biden is proposing significant new rules for 401Ks. He wants to make the contributions tax credits rather than tax deductions from income. I haven’t paid into a 401K since I left MegaCorp, so I guess I’m in the clear on this change, but I gave my son a heads-up, since he is just starting out.
– EXECUTIVE ORDERS – According to the New York Times, the immediate Biden executive orders focus on immigration/visas, the vaccine roll-out, and racial/LGBT equity. I wish them the best on some of those thorny issues, but none of them address my life directly. I don’t feel particularly at-risk from CV19, but will take the vaccine when it arrives.
– OBAMACARE: While campaigning, Biden has also made a lot of changes to the Affordable Care Act. We used to pay an extra $5K a year with our income taxes for ObamaCare, but I’m guessing we will be under the income limit now. We’re getting ready to switch our insurance to retiree MegaCorp coverage anyway.
– STUDENT LOANS: It’s very likely that Congress and the President team-up on some sort of student loan relief, but our son is now graduated and his college bills have been paid in full. I certainly doubt they are going to offer us a refund on what we already paid.
– CLIMATE CHANGE: We live in Minnesota and it’s January, so global warming wouldn’t be unwelcome here right now! Seriously, I really don’t think there is anything in the Paris Climate Accord that is going to do anything to change the weather.
– TAX DEDUCTIONS: Minnesota has been ranked the #1 “Least Tax Friendly State” by Kiplinger’s, so if anything, we may benefit if the so-called “blue-state tax deduction” is restored. I don’t think that’s fair to people in other states, but I’ll be glad to take it.
Looking at all the proposals, I guess my biggest concern is the risk of inflation that could result from all of the new spending & debt the Democratic Party seems willing to take on. That’s on top of how much has been run up in the last 4 years under Trump. Still, has an incoming President ever proposed $1.9T in new debt before even taking office?
In the early going since Election Day, the stock market seems to like the continued increase in government spending. Several of the big investment houses on Wall Street stated before the election that a Democratic Party win would be the best for the market.
At the same time, Fed guidance and T-Bond rates suggest that inflation is in currently in check. Still, I can’t imagine that sitting on a historically large pile of debt ($30T / 150% of GDP) can come with no cost to inflation at all.
We’ll see how things turn out over the next two years, but soon enough it will be time for the mid-term elections and we’ll see what path we take at that point. At this point, I don’t see any further ‘moves’ that I would take with our retirement investments, spending, or lifestyle.
What is your read of the changes in Washington DC and how it will impact you?
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