Good morning & happy Monday!
“Bad officials are elected by good citizens who don’t vote.”
– George Jean Nathan, 1882-1958
I know many of us are very apprehensive about the election that happens 4 weeks from tomorrow. It’s a nailbiter, one of the closest elections in my lifetime.
Buckle your seatbelt, these next 29 days are going to be eventful as the attack ads only increase from here!
I have strongly held personal political opinions; I know many of you do as well. As opposed to many movie stars, musicians, and sports figures, I realize you are not paying me to share my political opinions … you have hired me to manage your investments and financial strategies. But, this is one of the moments in time where politics and financial planning intersect, and I feel it’s important to share some thoughts with you.
I will try my very best to be as neutral as possible in my commentary today, my intention is simply to provide you with facts that will affect your financial life.
Let me start by saying that I am exceptionally concerned about the exponentially increasing national debt (now at over $35 trillion), which neither presidential candidate seems to have an interest in addressing. I find this beyond frustrating … it will take real leadership and courage to address this vital issue that will affect not just us but our children, grandchildren, and their children and grandchildren. We have a government addicted to spending and this is quite simply not sustainable indefinitely.
Ok, let me get off my soap box. 😉
Please also allow me to clearly state that I am by no means trying to persuade anyone to vote for a particular candidate, I am simply wanting to make sure you understand the financial ramifications of the various proposals of the presidential candidates. I’m only interested in the facts.
The current tax code, was an 8-year tax program that was passed in December 2017 which affected tax years 2018-2025. It is set to expire December 3, 2025, so no matter who the president is, this expiring tax code will require addressing. Without addressing the tax brackets will go back to pre-2018 levels, which were higher at all income levels. More on that in a few moments.
There is a historical precedent for this … in 2001 under George W. Bush taxes were lowered on a 10-year tax program. That program expired under the presidency of Barak Obama, and they were allowed to expire, which resulted in increased tax rates.
Neither Donald Trump nor Kamala Harris are running around saying, “I’m going to raise your taxes!” … that does not drive people to the polls. But, since all our taxes are scheduled to increase on January 1, 2026, I felt it was important to provide you with a fact-based analysis as this election will likely have a direct effect on our pocketbooks relatively quickly.
I don’t trust politicians, and I understand they will say virtually anything to get elected, but if some of the proposals espoused become the law of the land, they would have a significant impact on your taxes, and thus your bring home income.
Kamala Harris has proposed some pretty significant changes to the tax code including increasing the corporate tax rate from 21% to 28%, increasing the top tax rate to 39.6% (currently 37%), taxing long term capital gains at 28% for those with incomes over $1,000,000 (currently 20%), doing away with step-up in basis treatment of long-term capital gains at death for estates above $5,000,000 and taxing unrealized capital gains. More details here:
Kamala Harris Tax Plan 2024: Details & Analysis (taxfoundation.org)
Donald Trump’s big policy proposals include making the current tax code (that’s set to expire) permanent and lowering the corporate tax rate from 20% to 19%. If his first administration is any indication, Trump is also likely utilize tariffs on foreign goods as a revenue generator for the U.S. treasury, which is a wild card and discussed further here: Donald Trump Tax Plan 2024: Details & Analysis (taxfoundation.org)
I have been frustrated with both campaigns as they are very light on providing specific policy details. Both sides seem to be more interested in throwing mud at each other than sharing detailed plans about their vision for the future, but I suppose that is just the state of modern politics in America, much to my chagrin. Harris Tax Plan vs. Trump Tax Plan | Election 2024 (taxfoundation.org)
I seek to arm you with information so you can be an informed voter as whoever is victorious will have a meaningful impact on your financial life.
Ok, so what do we do with all this information?
First of all, I encourage you to vote. Your voice is important in the precious democracy we have. Today (October 7th) is the deadline to register to vote in the state of Florida. If you have not registered, I encourage you to do so … TODAY! 😊
After the ballots are counted and a winner is declared we will be proactive in our financial game plan for you.
A Trump victory will likely not require much change as the current tax brackets will likely be renewed, but this also depends on who controls Congress. A Harris victory will require us to be more proactive as it is likely that the current tax code will be amended. Strategies we may explore in that situation include realizing long-term capital gains, converting tax-deferred assets to tax-free assets (example: Roth conversions), and adjusting income distribution rates to utilize the current tax brackets before they expire in 2025. These are situational examples that won’t apply to everyone, but I commit to you that we will be proactive.
When the election results are released roughly half of Americans will be happy and the other half will be upset. Welcome to the divided America we live in today. ☹
But no matter who wins on Tuesday, November 5th, my team and I will be in the office on Wednesday, November 6th doing everything we can to put you in the best financial position possible.
Thank you for allowing us to partner with you. Please reach out with any questions or ways we can support you.
Make it a great week ahead!