Georgia has two new Democratic senators. For the incoming administration, Democrats will control all three branches of government – at least for the next two years. In the case of the Senate, each party now has 50 seats with the Georgia elections of Warnock and Ossoff, which allows Vice President Kamala Harris to cast a tie braking vote. So what does this mean for President Biden’s agenda and how might it affect taxpayers?
Biden has big goals for his term. His projected tax plan would raise somewhere between $2-$3 trillion over the next decade, aiming to help lower- and middle-class taxpayers over high-income earners. With the Georgia election resulting in a Democrat-led Senate, some of Biden’s agenda would be easier to pass. It is important to note that in many instances, legislation needs at least 60 votes to pass in the Senate (Fillibuster), which will require bipartisan agreement. However, the method of Budget Reconciliation would avoid the fillibuster and allow passage with 51 votes in the Senate. This is the same method that Congress used during the Obama Administration for passing the Affordable Care Act (AKA Obamacare). As well as the Trump Administration for passage of the Tax Cuts and Jobs Act (TCJA).
Some of the policies Biden campaigned on (a higher corporate tax rate or a Social Security payroll tax for those who make more than $400,000) might get through with some amount of compromise between the two parties. It is also entirely possible that these agenda items won’t pass if Democrats feel voting for certain measures would hurt their chances for reelection in 2022. Other policies, like Biden’s wish to expand the Child Tax Credit, are likely to find bipartisan support.
What Could Happen Sooner Rather Than Later?
It is more likely that in the immediate future, the focus will be on getting the coronavirus and vaccine rollouts under control rather than tax reform. Another stimulus package is probably in the works as well. Near the end of December, Congress passed a $900 billion stimulus package which included a $600 stimulus payment for individuals, an extension of unemployment benefits of $300 per week through March 14, 2021, small business relief, and more. Although both President Trump and Democrats objected to the $600 stimulus payment, a higher suggested payment of $2000 was blocked by the Senate.
Those larger stimulus payments are likely to be a top priority for the new administration, as Biden said the Georgia election results would affect whether or not increased stimulus payments would become a reality: “If you send Jon [Ossoff] and the Reverend [Raphael Warnock] to Washington, those $2,000 checks will go out the door…” he said at an Atlanta event the Monday before the runoff.
How Else Might the Georgia Runoff Election Affect You?
If you have questions or concerns about how the recent Georgia election may affect your finances, we’re here to help. While we understand that recent market performance and other financial news may cause uneasiness among some investors, we caution any investor against reacting financially to the news cycles. It’s important to work out long-term goals and stay the course with a trusted financial advisor to help. Our financial professionals equip you with strategies not only to save money in the short term, but to preserve your wealth for generations to come. Contact us today to discuss.
The Team at Chatterton & Associates
Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. Neither Royal Alliance Associates, Inc., nor its registered representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.