Talking to people, there is already a general consensus of how the 2020 election is going to turn out. Whether from optimism or cynicism, most people currently believe Trump will be re-elected. Most likely this is true as most presidents, no matter which side of the aisle, get re-elected when Americans are reaping the rewards of a booming economy. However, there is no guarantee.
Our economy is doing well, but it is very fragile. There is a lot of good going on, but we would be remiss in not mentioning some less encouraging conditions of the economy:
- Our federal debt is continuing to rise against GDP. Over the past 50 years our debt has averaged 2.9% of GDP. It is expected to be 4.7% of GDP over the next ten years. (Congressional Budget Office).
- Consumer debt has risen steadily over the past 5 years. It is 1.3 trillion dollars higher than it was in the third quarter of 2008.
- Global debt was projected to reach $255 trillion by the end of 2019, representing 320% of global GDP. (Institute of International Finance)
- S. manufacturing and agriculture have been on the decline for over a year (Institute of Supply Management: Purchasing Managers Index 2000-2019)
- The stock market keeps hitting new highs and price to earnings on stocks are high.
I am only pointing out the doom and gloom. That doesn’t mean there will be doom or gloom anytime in the near future. What is does mean is that all it would take is a single hiccup to send our nation spiraling into recession. If this were to happen prior to November, well, here’s to a new President.
Furthermore, it is highly unlikely that the house will flip despite the economy’s health. There are 35 seats up in the senate, 23 of these are Republican and 8 or so are in swing states. Democrats only need to gain three or four seats to take control. Believe it or not, what may seem impossible is very possible.
This leads to another non-partisan statement: No matter what side of the aisle you are on, you better have a life boat in place. And if you wait until election day, it will be too late. If the Democrats take the House, Senate, and Presidency, the biggest wave of taxes in history could be heading our way.
As Montana Democratic Senator Max Baucus stated… “Tax Reform is a once-in-a- generation opportunity.” Since the moment Tax Reform was passed, we have been preaching ‘PLAN NOW!’ We know, as do you, nothing is ever permanent in D.C.
Now is absolutely the time to plan for the unexpected. Let’s take a look at what some of the Democratic nominee’s proposals could do to our tax system:
- Income taxes would go up for almost everyone.
- Every nominee is running with a plan to eliminate the “step-to” in basis for real estate, investments, assets, etc.
- Capital gains taxes would be calculated at ordinary income tax rates.
- Creation of a new financial transaction tax.
- Creation of a new wealth tax.
- The estate tax exemption amount at best would at least be slashed in half.
- The Social Security tax cap would be eliminated and the rate raised for those paying into the system.
If November does swing our nation to the left, it will be almost impossible to get the tax planning you have needed to complete done before things begin changing in 2021 – and everyone else and their dog begin flocking to their tax planners.
You might be asking at this point…What if Trump does get re-elected? Wouldn’t everything I do be a waste?
The short answer is, “NO!” Tax Reform is not permanent even by its own design. Some benefits are already dimming out. This is potentially a once in a lifetime opportunity that could create a fortune for your future and your family. Or it is the once in a lifetime opportunity you’ll look back on regretfully when that pendulum in D.C. does inevitably swing.
Bottom line? Taxes are the lowest they have been in our nation’s history and they will go up. Will you be ready?