Taxes are coming, taxes are coming?

During the week of March 14th, the US Treasury distributed 90 million checks to Americans, totaling over $240 billion.¹ More payments are expected to be received on March 24th. US Retail Sales (ex-Autos/Gas) spiked in May 2020 and January 2021 thanks to prior stimulus check disbursements, and one would expect the same this March. Bi-partisan support has steadily waned and the political landscape will be increasingly more complex with the prospect of tax increases on the horizon. 

Wealth ≠ Jobs

One stark difference between the 2020 recession and the Great Financial Crisis of 2008-2009 is the difference in wealth creation and the trajectory of job gains. Thanks to strength in home prices, a V-shaped recovery in equity markets, and greater government transfer payments, US Household Net Worth is at an all-time high.²

What Comes Next?

With the $1.9 trillion American Rescue Plan signed into law, the next economic package is not as clear. The Biden administration has several routes they could take. They could seek bi-partisan support on one large infrastructure package, featuring spending and tax increases. They could split up the various proposals: spending in one bill seeking bi-partisan support, and taxation in another bill, to be passed via budget reconciliation. Filibuster reform is a looming threat, which would enable more of the Biden agenda to pass today, at the expense of large policy whipsawing in the future.

Expectations are for the Biden administration to propose a budget in May. The Democrats will debate the budget over the summer months while taking the temperature of Republicans to find any common ground. Given the large range of goals within the Democratic party alone, from the opinions of Sen. Sanders (VT) to those of Sen. Manchin (WV), a unified and clear plan may be difficult to identify. 

Key Tax Policy Items

President Biden campaigned on tax increases on the wealthy, with numbers like $1,000,000 and $400,000 as lines in the sand for those who should be taxed more. In December 2020, we hosted a webinar with Cornerstone Macro’s Head of US Policy Research, Andy Laperriere. Many of the key policy items then remain in play today. See below for a short list of the most impactful agenda items to know. 

Stephanie Link: CNBC TV Schedule

Sources:

1. CBS News, “IRS says more stimulus checks will land on March 24”, March 23, 2021. 
2. (US Household Net Worth & US Nonfarm Payrolls): Bloomberg.

Disclosures

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