The President-elect has ideas -- if not fully formed policy proposals -- that could have significant impact on your finances, for better or worse.
Shocking the polling industry — but not surprising his supporters one bit — Donald Trump has been elected the next president of the United States. He made a lot of promises during the campaign, a number of which could affect your wallet.
Trump should be able to get some things done. His party will control both houses of Congress. Although Republicans won’t have the 60-vote filibuster-proof majority in the Senate, the new president and his party should have a relatively free hand when it comes to making promises reality.
However, several of Trump’s ideas are not in line with traditional Republican policies. Only time will tell if he’s able to find sufficient votes to pass them. Here are seven issues Trump might address that could impact on your bottom line.
1. Health insurance costs
Republican lawmakers have said they wanted to repeal and replace Obamacare (the Affordable Care Act signed in 2010) pretty much from the start. Now, they have their chance. Some aspects of the legislation have been popular. These include the ban on denying coverage for pre-existing conditions, allowing people up to age 26 to stay on their parents’ plans, and the ban on insurers setting lifetime maximum coverage limits.
In addition, roughly 20 million uninsured people have purchased insurance through the state exchanges set up by Obamacare. However, rising premiums from insurers have cast long shadows over any prospect of keeping the program in its current state. It remains to be seen which changes will be made.
2. Consumer prices, manufacturing jobs
Trump wants to renegotiate the North American Free Trade Agreement — or NAFTA — and has said he won’t sign the Trans-Pacific Partnership multinational trade agreement. These deals have become four-letter words in factory towns across the country, as free trade is blamed for making it attractive for companies to move plants to other countries with low labor costs. Undoing NAFTA may require Senate approval (though it’s unclear), but the TPP could be scuttled by the new president.
What this means is a mixed bag. These deals have given Americans access to low-cost goods from overseas. Abandoning these pacts would drive up prices on many consumer goods. If the Trump administration and Congress could engineer it so that abandoning the trade deals would prompt manufacturers to reinvest in U.S. plants and employ U.S. workers (instead of robots), it could be good news for blue-collar families.
Trump also called for steep tariffs — essentially taxes on imports. In some cases he’s specifically called out the Ford Motor Co. for making goods outside of the country. In others, he’s made general comments about imposing high tariffs on a broad swath of imported goods. This would, obviously, increase the costs of those goods to the consumer. According to Trump, these moves would also lead to more domestic jobs by making goods produced in this country more competitive.
Trade deals negotiated over the past several decades have allowed huge growth in imports, but they have also made it easier for U.S. companies to sell to foreign markets. Reinstating tariffs and quotas could lead to a trade war — prompting other countries to impose similar tariffs on exported American goods, presumably reducing sales of these goods overseas.
3. Tax cuts
Trump’s proposals call for cutting taxes on businesses — reducing income taxes to three brackets — 12 percent, 25 percent and 33 percent. Whether you would benefit from this change depends on how much you earn. Under this plan, the wealthiest people will get the biggest cut. What happens to lower-income people isn’t likely to be as nice, since the lowest tax-rate bracket will go up from 10 percent to 12 percent.
While the standard deduction would also go up, a basket of other tax code provisions would go away, likely meaning a net increase in taxes paid by working families with children and single-parent households, according to a recent report from the Urban-Brookings Tax Policy Center. The report estimates the changes to the tax code would increase the national debt by $20 trillion over the next 20 years.
Trump disputes these findings. He expects that by reducing taxes on business (while eliminating many tax loopholes and incentives) and reducing regulations (without specifying which ones), renegotiating trade deals and increasing domestic energy production, the economy will see tremendous growth.
He’s also said that under his plan, individuals making less than $25,000 per year, or couples making $50,000 per year would no longer pay income tax.
4. Child-care costs
Trump has said he wants to change the way parents deduct child-care costs — allowing deductions up to the average for their state — instead of a maximum deduction of $3,000 for one child or up to $6,000 for two or more. People who live in higher cost-of-living areas may be hurt by this. The deduction would be available to individuals making up to $250,000 per year, or $500,000 for married couples.
Under his proposal, new mothers would be able to collect unemployment for six weeks of maternity leave from their jobs. He’d also allow people to create special child-care accounts where money could grow tax-free. There’s a grab bag of different deductions and allowances depending on income level. Low-income families who managed to put in $1,000 per year would get a $500 match from the government. Some advocates note that this would help wealthier families by providing a tax shelter for them, while many poor families would be unlikely to have an extra $1,000 per year to set aside.
5. Retirement benefits
Trump has said he wants to leave Social Security as is, and he has opposed an increase in the retirement age. However, many experts expect the program to face financial difficulties in the coming decades unless there are substantial changes to it, and Republican leaders have expressed support for an increased retirement age.
6. Infrastructure jobs?
Trump has promised to rebuild bridges, highways and airports, and to do it for one-third of what the country currently pays for such projects. Even at that discount, the money for the projects would need to come from somewhere — and it’s unclear how much Congress will allocate. On the up side, it could potentially create a large number of construction jobs.
7. Wall Street changes
Trump has vowed to scrap the Dodd-Frank Wall Street Reform and Consumer Protection Act (usually referred to as Dodd-Frank), a package of financial regulations that was passed under President Barack Obama after the 2007-2009 recession. One element was creation of the Consumer Financial Protection Bureau.
The impact of such changes are difficult to foresee, but they’re more likely to benefit high fliers on Wall Street than small investors or non-investors on Main Street. He also wants to end the “carried interest deduction,” a loophole that many Wall Street insiders use to reduce their effective tax burden.
What do you think President Trump will be able to push through Congress from this agenda? What do you think will be the top of his agenda? Share with us in comments below or on our Facebook page.