On January 20, 2017, Donald Trump officially becomes the 45th president of the United States.
While that status has meaning on a wide scale for Americans, perhaps the most important scenario-shifters come from Trump’s economic policies – especially on how they impact Americans’ kitchen table finances.
Here’s a snapshot of the economic policies President-elect Trump favors and how they impact your household finances.
Throughout his campaign Trump signaled that his administration would either repeal, or significantly change, Obamacare. Since he won, however, Trump has said he would like to keep parts of the law intact, such as the rule that insurers can’t deny coverage to people with pre-existing conditions and that people under age 26 can remain on their parents’ health plan. The conventional wisdom says the Affordable Care Act will not likely be completely repealed.
There’s also talk in Washington, D.C., that a Trump administration would either gut or significantly weaken federal financial industry regulations put in place during the Obama administration. Again, that is just talk right now, but expect those discussions to turn into reality in 2017. In the event Dodd-Frank is dismantled, consumers can expect looser lending and credit standards for millions of Main Street Americans. On the downside, financial consumers operating on the margins of the economy (think pre-paid debit card users and the “unbanked,” among others) may be more vulnerable to unethical financial services providers.
With President Trump boosting the standard tax return deduction from $15,000 to $30,000, among other moves, Americans should see a more simplified tax code – if Trump’s policies actually become law. “Trump plans to revise both the individual and corporate tax codes and has proposed collapsing the seven tax brackets into three,” says Bill Harris, CEO of San Francisco, Ca.-based wealth management company Personal Capital.
Here are what tax rates will look like for Married-Joint filers under Trump’s plan:
Less than $75,000: 12%
More than $75,000 but less than $225,000: 25%
More than $225,000: 33%
Harris says Trump plans “to not touch” Social Security and wants to maintain current Medicare programs once he is sworn into office. “With a currently underfunded Social Security system, we recommend that investors take a conservative approach and plan for a reduction in Social Security benefits or an increase in the Social Security tax rate while working,” he adds.
Paying for college
Trump plans to up higher education spending by $20 billion, and to jawbone colleges into shouldering more of the financial burden on tuition and college living costs. That’s not likely enough to make a big difference in U.S. household college spending. For families facing steep college costs, that means increase those savings. With the likely difficulty of funding $20 billion for higher education, Harris advises families nevertheless to “plan ahead and budget $25,000-$40,000 per year for education.”
Impact on small businesses
Trump wants to loosen regulations on the small business sector. Less regulation typically means less costs for a small business, and giving the business owner more money to spend on other areas such as growing their business and inevitably hiring more people. Trump has also called for lower taxes for small business owners. “Small business owners list taxes as one of their top concerns,” says National Federation of Independent Business President and CEO Juanita Duggan. “They want reform that features fewer brackets and lower rates. Mr. Trump’s recognition that the current tax system is a tremendous burden on small business is an encouraging sign.”
Impact on jobs
President-elect Trump recently made headline news by keeping 1,200 Carrier Corp. jobs in Indianapolis, Ind., instead of seeing them shipped out to Mexico. In doing so, he signaled that a big priority would be keeping U.S. jobs at home, and that he would focus on trade and regulations to get that job done. Experts, however, warn the Trump administration not to go overboard. “I can only hope that most of President Trump’s vitriol on trade can be dialed back to something more reasonable,” says Nick Ventura, founder and CEO of Ventura Wealth Management. “We do not want a protectionist country. Free trade is a benefit in aggregate. I hope we can reach ‘fair trade’ through negotiation, not bitter confrontation.”
President-elect Trump promised that his administration would be a game changer, and that certainly should be the case. For Americans wondering how a Trump presidency will impact their pocketbooks and wallets, the consensus calls for big change indeed.
MagnifyMoney is a price comparison and financial education website, founded by former bankers who use their knowledge of how the system works to help you save money.