How it happened to become the Holiday Season so quickly will remain a mystery of the Universe. Yet, here we are, and at this time of year I like to evaluate how far we have come, financially, and where we’d like to go in the imminent New Year. Since passage and implementation of the Tax Cuts and Jobs Act of 2017, much has changed. Unfortunately, much remains to be desired going forward, including:
- Wish # 1 –Income tax rates have been lowered for individuals, and now need to be made permanent in order to avoid a scheduled reversion to the previous (higher) rates in 2025.
- Wish # 2 – Reduce Capital Gains tax rates, which were not modified in the 2017 Act.
- Wish # 3 – Dramatically increase contribution limits for IRAs, which are currently only adjusted for inflation. This will encourage personal responsibility for retirement savings.
- Wish # 4 - Repeal all Estate (Death Taxes) and Gift Taxes. This happened (in a modified way) for one year in 2010, but those taxes came back in 2011, and now need to be permanently repealed.
- Wish # 5 - Eliminate the Clinton-era tax increase on Social Security benefits for certain income levels, from the current 85% taxable to the previous 50% taxable limit. (Ideally, all Social Security income would be tax-free, as promised when the system was first implemented in 1935. That is likely too much to ask of a government that is critically reliant on every dollar of our taxes.)
- Wish # 6 – Eliminate the Alternative Minimum Tax (AMT), which was implemented in 1969 in order to force a handful of wealthy Americans to pay a minimum amount of income tax, despite them already following all the rules in the Tax Code. Over the years, the AMT was expanded to include thousands of Americans and corporations. This Administration managed to repeal the Corporate AMT, and now is the time to eliminate the entire onerous AMT concept.
This list has been prioritized, with Wish # 1 ranking highest by far. Hopefully, Congress will follow through with making the new rates permanent, and, with luck, add a few of my other wishes before singing Auld Lang Syne. Passage of these changes would boost our already-revived economy, extending the current period of prosperity.Van Wie Financial is fee-only. For a reason.