Mattson Financial Blog
Right now, it’s looking likely that Vice President Biden will become the new president on Jan. 20, 2021. And with Democrats losing House seats and not gaining anything in the Senate, many people will be watching the Georgia runoff election in January with anticipation. It may determine the balance of power in the Senate.
Personally, I’m not too worried about a Biden presidency with a Republican-controlled Senate. Alternatively, if Trump stayed in office with a Republican-controlled Senate, we would see a continuation of what we’ve seen over the past four years, especially in regard to taxes. Things would be maintained as they are.
With a Biden win and a Republican Senate, I know we’re going to see an increase in taxes, but I believe they won’t be the double-digit promise from the election. That aside, we know the Trump-era tax cuts will sunset in 2025, so we will have tax increases regardless. It’s just a matter of when.
Everyone is worried that it will happen sooner rather than later, which may end up being the case. COVID-19 turned the U.S. debt into a dragon that feeds on interest payments. We’re in a place where we have to pay down not only the debt we already have, but also interest.
A majority of the debt the U.S. carries is owed to the people in the form of Social Security, Medicare, and Medicaid. To pay down the debt, we have two primary choices: raise taxes or cut benefits. Or we can do a little of both.
If you believe in Santa Claus, you may hope that we’ll see a gradual tax increase that is fair and based on income. It’s the kind of increase that would be acceptable to all Americans. However, there’s always the chance that the dragon will come down from the mountains and scorch the land, demanding that tax increase in full.
As I said before, I’m not concerned about a Biden presidency. I am concerned about a change within that presidency. If they impeach or find the president incapable of fulfilling his duties due to mental deficiency, we could end up with President Harris. She would potentially be the first woman (and first woman of color) to take on the role of president.
While that’s great for our country, what isn’t great are her intentions. She will raise taxes, but she has also said she will give it back in the form of shelter, clothing, and food. If you are someone who has worked and saved and you have a comfortable retirement, you may have a problem with this. I know I don’t need someone to tell me what clothes to buy, what food to buy, or what kind of house I should be living in.
Of course, she isn’t really talking to most of us. She talks about giving the shelter, clothing, and food back to those without the ability or desire to work and save. Now, I’m not saying we shouldn’t help our fellow man, but I’m a big believer in the proverb, “If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.”
I’m not here to address the far left’s idea of socialism. We already know it doesn’t work. We’ve seen it in other countries where black markets take over and you have more lawlessness when it comes to money. Left-wing socialists also represent a fraction of Americans. On top of that, you can’t have socialism to the degree the far left would like with the amount of debt the U.S. has already incurred.
So, while we don’t expect doomsday, if we do end up with a Biden administration and a Democratic House AND Senate, the needle will move further to the left and away from the balanced structure we currently have. Over the past several months, we’ve seen what it looks like when people don’t have an incentive to go to work. If that continues, it will damage our free enterprise system, which could take years to repair — if it’s even possible to repair by then.
So what will the next few years bring? Can we expect Santa or the dragon? As we watch the Jan. 5 runoff Senate race in Georgia, we’ll be interested in the results. It may tell us what to expect. Either way, we’ll eventually see a tax increase.
My advice is to use this time to determine the best path for your future income as well as what your retirement may look like once the new tax thresholds have been announced. As the pieces fall into place, we’ll be reporting to all of our clients their individualized road maps to help them maintain their lifestyle in the lowest tax bracket possible.
For now, let’s be patient and plan accordingly. Your concerns are our concerns. You can rest assured that we’re watching things closely and looking for new opportunities. It’s already been predicted that no matter what happens, we should still see growth in the marketplace, so I’m looking to the future with optimism.