The Election, Taxes and Your PortfolioSubmitted by Orange CA Financial Advisor | Sterling Wealth Partners on September 7th, 2016
“The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.”- J. B. Colbert
The November 8th election day is fast approaching and rhetoric from both parties is really starting to heat up. Listening to both parties, you would think that the other’s economic and tax plans will spell disaster for the country and plunge the economy into chaos right after the election.
Now that the they are the official candidates for election, Donald Trump and Hillary Clinton have both released their tax plans which we have summarized* below.
- 3 income tax brackets: 12%/25%/33%
- Add child care deduction
- Keep the current 0%/15%/20% rates
- Repeal 3.8% “Obama Care” tax
- Repeal the estate tax
- Keep income tax current brackets
- Add 4% tax rate increase on $5,000,000 + incomes Minimum 30% tax on $1,000,000 + incomes
- Long-term capital gains would be more than 6 years
- New mid-term capital gains rate for 1-6 years
- Move estate tax rates back to 2009 levels: $3,500,000 exemption & 45% rate
While the President can propose legislation, it is Congress that actually writes and passes laws. So what will happen to taxes is really dependent on the make-up of Congress and what they can get accomplished. With the current Republican majority in Congress and a Democratic President, little in the way of legislation has been passed recently. Should we end up with a President and Congress majority from the same party, then it may be possible some of these tax proposals could become reality. So the Congressional elections are of as much importance as the presidential election.
While it will take time (perhaps years) for any tax proposals to actually become law, there is the possibility of event driven market volatility to occur as a result of the election. The recent departure of Great Britain from the European Union (the “Brexit”), is a good example of how an event can create large market swings due to both positive and negative speculation. Regardless of who wins the election, there is the potential for market upheaval as investors speculate about how the new president will affect the economy and the markets. At Sterling Wealth Partners, we feel it is our duty as financial advisors to help you stay on track to work towards your financial goals and to avoid the distraction of event driven market volatility.
Because the upcoming election will no doubt bring uncertainty around taxes, the market and the economy, we are offering educational seminars in late October and early November around how the election may affect your retirement income plan. The dates are October 25th and 27th in Yorba Linda and November 1st and 3rd in Brea. Please look for more information on our seminars soon.