Newsletter 07/23/2020

SAS Financial Advisors, LLC |

Events are unfolding rapidly, assumed Democratic Presidential candidate Joe Biden is presenting policy statements. Of particular interest to us is his proposed tax reform policies. Here is a link with some non-partisan analysis in regard to the proposals impact on the many issues of tax policy.

Basically, Biden proposes to raise taxes on wealthier Americans with an income level of $400,000 and to increase corporate taxes from current 21% to 28%. Also, an increase in capital gains and dividends for income over $1M as well as a tax on estates with embedded capital gains so the step up in capital gains for estates will go away. The Pease cap on itemized deductions will be brought back which limits itemized deductions for higher incomes. Social Security taxes will have a donut hole between the current inflation adjusted income cap ($137,00 in 2020) and $400k when social security taxes will return. There are various other tax incentives for childcare, caregiving and a change in treatment of retirement plan contributions. There are also tax incentives for alternative energy producers, electric cars, student loans and retirement savings.

The impact on Americans will be a more progressive tax system and an increase in revenue of just under $4 trillion over 10 years. It also could negatively impact job creation because of the additional taxes on businesses. Overall though, it is a definite change in direction. The tax reform bill passed in 2017 focused on lower taxes for businesses as well as wealthier Americans. This proposal is more focused on middle and lower income Americans. Your tax bill is definitely rising if your income is over $1M and also will rise but not as high if your income is higher than $400k.

There is more to come as the tax proposals do not include increased government spending on infrastructure and public health. Recent proposals have advocated for increased investments in caregivers, childcare and more. Biden also has proposed a significant climate change proposal costing $2 trillion. Concern in regard to debt and deficits has been tossed aside by both parties. We might all have to become familiar with Modern Monetary Theory. Google the term to find out more.

The stock market continues higher so far this week and the Nasdaq has set a new record. Main street doesn’t seem to agree as enhanced unemployment benefits and the small business PPP loan program both end by the end of July. It looks like fiscal stimulus on the part of Congress will have to wait until August. Democrats propose a wide ranging $3 billion program, the Senate and White house propose just over $1 trillion. The sausage makers will do their thing in August.

As interest rates stay low, investors are forced to take more risks to receive higher yields in the stock market. This is a time to look at mortgages and check with your lender or broker to see if you can lower your mortgage interest rate. 30 year mortgage loans nudged below 3% this week. Contact the SAS Team if you are interested in refinancing or buying; as your advocate/fiduciary we are here to help. Lenders and mortgage brokers do not have the same obligation. We can make sure you are prepped with appropriate knowledge as you proceed down these paths.


Ira Fateman and The SAS Team