Now Are My Taxes Going To Rise?
In the days leading up to the inauguration I’ve been asked this question many times. Although I don’t know the answer, I sent you this note September 24, 2020:
The primary market risk from a Biden presidency may likely come from potential tax increases. Higher business taxes directly impact the earnings of publicly traded companies, which may flow through to stock prices. There’s also the larger question of the impact of higher taxes on the overall economy.
From a market perspective, the major concern is an increase in capital gains taxes, which potentially could lead to some selling before the higher rate goes into effect. Biden is unlikely to be able to pass such a provision without a Democratic sweep, and even a narrow majority in the Senate may not be enough. If sold positions are reinvested in stocks, the net effect may be negligible, and for some investors, deferring taxes, even at a higher future rate, may be more desirable than recognizing gains immediately.
And now as I write this, the pieces are in place that were unthinkable a few short months ago.
As it currently stands, I expect the national debt will continue grow out of hand which will eventually lead to tax increases or a collapse. There are ways around both but Biden has given no indication of exploring those.
If you look at National Debt By Year, you will see that the debt has hit a milestone every year since the Great Recession (and sometimes more than once). The only exception was 2015, due to lower spending. Here are some recent examples:
- Aug. 31, 2012: $16 trillion
- Oct. 17, 2013: $17 trillion
- Dec. 15, 2014: $18 trillion
- Jan. 29, 2016: $19 trillion
- Sept. 8, 2017: $20 trillion
- March 15, 2018: $21 trillion
- Feb. 11, 2019: $22 trillion
- Oct. 31, 2019: $23 trillion
- April 7, 2020: $24 trillion
- May 5, 2020: $25 trillion
- June 9, 2020: $26 trillion
- Oct. 1, 2020: $27 trillion
And make sure you check the National Debt Clock where we currently stand as we close in on $28 trillion.
My advice? There are many strategies to potentially lower future taxes. Call me, and we’ll find the best one for you.
