For the second time in four years, we find ourselves with a president whose party holds a narrow majority in both houses of Congress. Both presidents took the opportunity to try to pass big changes to the tax code. The narrow majority tends to limit their reach. How do they get around that? They enact changes that are temporary, hoping that the changes become popular enough to be made permanent. Ultimately some things stay, and some go. The result is an ever-changing tax code.
I’m starting to view the current tax code like a quarterly earnings report. It’s useful, but it’s hard to base a long-term decision on it. How should you plan in an environment like this? Stay flexible. Be knowledgeable about the current laws and understand what might change over time. Don’t act on anything until it becomes law, and even then, consider how it actually impacts your situation.
It will be interesting to see what of Biden’s proposals become law and for how long. Then we can determine whether it should change our plans. Call me if you need help with that.
Also, this reminds me of one my fundamental investing beliefs. Never invest in something based on its tax treatment. That favorable tax treatment may change.
About the Author: John O’Connor
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