Coffee Notes

Be Prepared for the Future.

Financial Planning
RSWA » Latest Articles
04.30.2021 by David Robinson

Biden Proposes Bold Financial Assistance to American Families

President Biden went “big” again this week, unveiling his American Families Plan, which proposes spending $1.9 trillion to assist American families. Almost stunning in policy scope and shift in government philosophy, the American Families Plan aims to bolster US families and individuals under financial stress that have benefited less, if at all, from the US economic recovery. This assistance would include the following programs: various spending and tax initiatives to fund and facilitate childcare; two years of tuition-free community college for all Americans; a universal preschool program; and a national paid leave program for those who need time from work to care for a loved one or child. CNN New York Times

Potential Tax Increases to Pay for the American Families Plan: President Biden also proposes funding the family financial assistance programs by raising taxes. These increases would include the following: moving the top marginal income tax rate from 37% to 39.6%; for households earning more than $1.0 million, raising the highest rate for taxing capital gains and dividend income to 39.6% (plus the 3.8% investment tax taking it to 43.4%); eliminating the stepped-up basis on unrealized gains that heirs now receive but with both a $1.0 million exemption for all individuals and a $500,000 exemption for the primary residence of married couples; and expanded IRS funding to reduce tax avoidance and fraud under current law. Wall Street Journal Washington Post

Handicapping the Odds of the American Families Plan Becoming Law: We expect Congress to scale back the proposed American Families Plan. These proposals are relatively popular with the American public but will face political headwinds. Republican Senators will be almost unanimously opposed and a handful of Senate Democrats will not support that much spending and tax increases of that magnitude. Greg Valliere, a respected strategist in the investment community, predicts that President Biden will get $1.0 trillion for the American Families Plan, which is still a considerable number. Perspectives.AGF

What Should Investors Do? Early in the American Families Plan policy debate, the investment markets are not showing signs of unusual volatility. Year to date, the CBOE Volatility Index is down significantly. VIX The proposed increase in capital gains taxes only targets high earners and will not impact retirement plan sales in any event. Still, it bears watching and discussing with your financial advisor, particularly if you have high unrealized capital gains in a post-tax account. The change in estate taxation (i.e., elimination of the stepped-up basis subject to certain exemptions) could impact many families. As the policy debate moves forward, consider opening discussions both with your estate attorney and financial advisor if it appears that the proposed estate tax modifications are garnering support.

Jerome Powell Has Biden’s Back: The Fed indicated today that it has no near-term plans to back off its easy-money policies. CNBC It anticipates some near-term inflation due to supply-side problems but that the risks of embedded, long-term inflation are within tolerable limits. But there are inflation hawks out there who fear that the Fed will not be sufficiently proactive relative to inflation. CNBC

Secret Talks on Infrastructure: Axios reported this week that the Biden administration is quietly holding meetings with a group of Republican Senators who are open to a compromise spending plan on infrastructure. This news is heartening. Serious spending on infrastructure (roads, bridges, etc.) is needed. But the political art of compromise is in short supply in our polarized world. The tenor and tone of public discourse matter too. It is not all about politics and policy wins and losses. Axios

How to Buy Happiness: I encourage all to read the linked thoughtful essay by Arthur Brooks that discusses what research has to teach us about the relationship of money to happiness. At the risk of oversimplifying, having more money does make us happier, but only to a point. One estimate is $92,000 in today’s dollars. Beyond that level of income, what matters more is how you spend the money you have. Paying for experiences, buying time, and gifting are known to increase happiness. Doing things with and for loved ones is a big happiness boost. The Atlantic

New Hampshire Shows Out in Emerging Home Markets: Not everyone is moving to the Sunbelt. Indeed, some of the fastest-growing home markets are in places like Idaho. New Hampshire is appealing, too, with Concord and Nashua/Manchester nailing the 8th and 9th rankings respectfully on a new emerging home markets survey. MarketWatch Wall Street Journal

Celebrating 100! On a personal note, this Friday, Annie and I will be in Lexington, Kentucky, celebrating my mother’s 100th birthday. It isn’t something we took for granted since she has been effectively quarantined for months in a long-term care community. She may be physically frail, but her life spirit has been strong. And now she will be able to celebrate surrounded by her loved ones. When we toast her, in my mind we will also be celebrating all those who have suffered during the pandemic and who are now emerging into a better time.

Worthy Short Takes: 

  • Walking in Rachel Carson’s Footsteps: This article is a powerful reminder to how much we owe Rachel Carson. Nature Conservancy
  • A New Insight Into Friendship: It is well understood and documented that friendship matters a great deal to the happiness of most. Now we have another insight that proximity matters. It stands to reason but reinforces that we need to nurture friends wherever we live.
  • Moving From Essentialism to Effortless Podcast: Greg McKeown and Tim Ferriss are two of my favorite writers. In this podcast, they combine to discuss Greg’s new book, Effortless, which addresses how we make it easier or more effortless to accomplish what truly matters to each of us.
  • 10 Incredible Short Hikes in Maine: Ready to get moving? All these are under 5 miles.
  • Top US Travel Destinations: Speaking of moving, we are hearing from many clients and friends that plan to resume travel. See this list of the top 25 trending US travel destinations for ideas.

Feel free to send us feedback on any topic, suggestions for improvement, or to forward the notes to anyone who might be interested.

As always, thank you for reading. Stay safe and be well. We look forward to hearing from you and connecting.

Subscribe Today

Get the The Ultimate Portfolio Review Checklist. Subscribe & download it now