January 27- The pen is still mightier than the sword

After months of election uncertainty, Joe Biden was inaugurated as our 46th president, bringing the peaceful transfer of executive power that defines us as a democracy.

President Biden’s pen has been busy, busy, busy so let’s dive into some new policies that could impact you.

Student loan freeze: The Department of Education extended the suspension of federal student loan payments through September 30, 2021, giving borrowers some extra breathing room this year. No interest will accrue during that period, and each month will count toward public service loan forgiveness as well as student loan rehabilitation. Unfortunately, private loans are again excluded from the freeze.

Foreclosure and eviction moratoriums: The CDC extended the federal eviction moratorium through March 31, 2021, preventing renters from being evicted for non-payment of rent. Fannie Mae and Freddie Mac also extended foreclosure and eviction moratoriums until February 28, 2021.

Rental assistance: Under a program passed in December, states will begin disbursing $25 billion in rent assistance to help tenants pay rent and utilities. Funds can be accessed locally through housing groups, 211/311 information lines, and local representatives.

Will Americans receive more stimulus checks?

I think that’s likely, but it’s not yet clear who will get them or how much they’ll be. The new $1.9 trillion stimulus program Biden has proposed offers $1,400 stimulus checks, enhanced unemployment benefits, a $15 minimum wage, aid for states and local governments, money for COVID-19 vaccines and testing, as well as help for parents and schools.

What will the final bill look like once Congress finishes negotiating? Unknown.

Opinions and criticism abound. Some think the proposal is too big, too costly, and risks overheating the economy. Some believe it doesn’t do enough to address the real pain many Americans are experiencing. Others think that getting it done (and done quickly) is more important than getting it perfect.

Tax season starts later this year, but the filing deadline is still April 15 (for now).

The IRS has pushed back the start of tax season by several weeks, delaying tax returns’ acceptance and processing until February 12. Currently, the tax filing deadline is still April 15, but that could also change.

Required Minimum Distributions will start again this year after last year’s suspension by the CARES ACT passage. We may get another freeze this year, but that will depend on the speed of the nationwide vaccination program and the economy’s condition after more states reopen.

I’ve had some questions about how the administration’s tax policies will affect clients and their portfolios.

During the campaign, most of President Biden’s tax proposals were more of an offset to pay for the programs that he wanted to enact (infrastructure spending etc.). So, a great deal of the potential tax increases you hear are paying for possible programs. Once we get a better idea about the administration’s priorities and agenda, we will get a better idea of the tax increases’ scope. We know most of the tax increases will be felt by corporations and wealthy individuals which was a consistent theme during his campaign.

Some of the more contentious increases we see would be around estate taxes, the loss of a step- up in inherited basis for homes and stocks, and the elimination of the section 1031 tax-free real estate exchanges. Given the razor-thin majorities the democrats have in both houses and a mid-term election in 2022 (yes, already), these policies cannot be so one-sided since many will vote on these will face an election in 2022.

Our initial beliefs that any heavy lifting around taxes will have to be done in the second half of 2021 or early 2022 because of the COVID pandemic. The economy needs to reopen nationally and improve before the government can levy additional taxes its businesses and wealthier individuals. It would be political suicide to raise taxes in an economy that hasn’t fully recovered from the COVID and all of the related shutdowns across the nation.

Another item we will continue to watch is the creation of a financial transactions tax. A tax on financial transactions was an idea supported by VP Kamala Harris during her campaign, but she provided few details. We aren’t sure if that tax would apply to specific types of stock trades or certain types of accounts, but we will be following it closely.

Having been in this industry for the better part of 30 years (ugh), I often see a large difference between campaign promises and enacted legislation. The market has rallied on tax policies that didn’t appear to be friendly but was a much better result than had initially been anticipated.

That’s a lot of information to digest. And more will be coming as the new administration settles in and starts working on what’s promising to be a big agenda for the first 100 days.

Please look for our next video market update, which will be released next week.

Be well & stay safe.