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What Railroaders Should Know About the Election Thumbnail

What Railroaders Should Know About the Election

Tier 1 Tier 2 Video Retirement Financial Planning Investing Taxes

Understand the Presidential Candidates' Tax Policies and Their Impact on Railroaders

Welcome everyone to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name is John McNamara from Highball Advisors. As you know, we are in an election season, so I thought it would be helpful to discuss the tax proposals of each candidate and their potential impact on railroaders, retirees, and pre-retirees.

Election Season and Market Volatility

Election seasons often bring volatility due to policy uncertainty, market sentiment, and economic indicators such as consumer confidence, unemployment rates, and GDP. All these factors can influence market prices and create a fluctuating environment.

Republican Candidate: Trump and a Republican Congress

Assuming Trump and a Republican-controlled Congress, here are the key proposals:

  1. Making the Tax Cuts and Jobs Act (TCJA) Permanent: The tax cuts enacted in 2017 are set to expire at the end of 2025. This proposal aims to make them permanent.
  2. Exempting Tips and Bonuses from Income Tax: This proposal could potentially lead to misuse, where employees might prefer bonuses over regular pay to avoid taxes.
  3. Lowering Corporate Tax Rate to 20%: This is a slight reduction from the current 21%.
  4. Exempting Railroad Retirement Tier 1 from Taxes: Similar to Social Security, Tier 1 of railroad retirement would be tax-exempt. Tier 2 would remain taxable.
  5. Increasing Tariffs on Imported Goods: This aims to boost domestic manufacturing but could also lead to inflationary pressures.

Democratic Candidate: Harris and a Democratic Congress

Assuming Harris and a Democratic-controlled Congress, here are the key proposals:

  1. Extending TCJA for Incomes Under $400,000: The tax cuts would continue for those earning below this threshold.
  2. Exempting Tips from Income Tax: Similar to the Republican proposal.
  3. Increasing Top Tax Rate to 39.6%: This is a return to pre-TCJA levels.
  4. Implementing an Unrealized Capital Gains Tax: This would tax the increase in value of investments before they are sold. This complex proposal would require significant legislative support.
  5. Raising Corporate Tax Rate to 28%: This could disproportionately affect industries that cannot relocate, such as railroads.
  6. Maintaining Current Tariffs: No additional tariffs would be imposed, but existing ones would stay in place.

Final Thoughts

In any election, there's always the possibility of a split Congress, which could result in gridlock and little to no changes in tax policies. It's important to stay informed and prepare for any outcome.

I hope you found this video helpful. Stay sane during this election season, and until next time, stay safe, stay on track, and take care. So long, everybody!

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved from Highball Advisors, and all rights are reserved.