5 key personal finance issues this midterm election - and what they mean for your wallet

5 key personal finance issues this midterm election – and what they mean for your wallet

As Americans head to the polls, several key personal finance issues weigh on voters’ minds and wallets.

This week, the Federal Reserve enacted its fourth consecutive 0.75 percentage point increase in interest rates to fight inflation, triggering further losses in stock markets.

Meanwhile, recession fears are growing, with 84% of Americans worried about how a prolonged economic downturn could affect their finances, according to a MassMutual report released Thursday.

Learn more about personal finance:
What the Fed’s 0.75 Percentage Point Interest Rate Hike Means for You
Democrats warn Social Security and Medicare are at stake
What the ‘Millionaire Tax’ Plans on the Ballot in California and Massachusetts Mean for High Earners

“The global economy has been so important, and I think it really influences the election,” said attorney Marc Gerson, chair member of the tax department at the Washington DC law firm Miller & Chevalier.

Some questions appear on state ballots, but federal politics depends on which party controls Congress. While Republicans are favored to win the House, the Senate relies on a handful of competitive races.

Here are five of the most pressing issues this election season — and how Tuesday’s results could affect your wallet.

1. Democrats cite threats to Social Security and Medicare

As Election Day approaches, Democrats are telling voters that Social Security and Medicare could be at risk if Republicans take control of Congress.

“They’re going after your Social Security and Medicare in a big way,” President Joe Biden said in a speech Tuesday in Hallandale Beach, Florida.

The Inflation Reduction Act enacted Medicare reforms to reduce prescription costs for retirees. However, Republicans could try to stop those changes, Biden said.

He also pointed to possible risks to Social Security, based on the plans of some Republicans, including the Senses. Rick Scott from Florida and Ron Johnson from Wisconsin. But both lawmakers denied intending to harm the program.

Scott has called for reauthorizing Social Security and Medicare every five years in Congress, while Johnson suggests reviewing the programs annually.

2. Republicans call for more tax cuts

Ahead of the midterm elections, some Republicans are calling for expanding key elements of President Donald Trump’s 2017 tax overhaul.

These lawmakers target certain provisions that will expire after 2025, including individual tax breaks, a 20% tax deduction for so-called “intermediary businesses,” where business income is paid into individual tax returns, and more. .

“They would like to see these provisions, ideally, made permanent, but at a minimum, extended — and extended as soon as possible to give taxpayers certainty,” Gerson at Miller & Chevalier said.

Even if Republicans take control of both chambers, they won’t have the 60 votes needed in the Senate to circumvent the filibuster and Biden won’t sign those measures, he said.

However, Republicans will still try to pass these “political messaging bills,” Gerson said. “That really sets a lot of the platform for the 2024 election.”

3. Minimum wage hike on the horizon

Voters will decide this month whether to make some minimum wage increases in Nebraska, Nevada and Washington, D.C.

In Nebraska, the measure would raise the minimum wage to $15 an hour by 2026, from $9 currently.

Nevada’s current hourly minimum wage, meanwhile, would increase to $12 for all workers by 2024. The current minimum wage is $9.50 per hour or $10.50 per hour, depending on whether or not the worker has health insurance.

The ballot measure in DC, if it gets enough votes, would phase out tipping pay, which allows companies to pay their workers less than the $16.10 minimum wage if their tips make up the difference.

Ben Zipperer, an economist at the Economic Policy Institute, said he wouldn’t be surprised if Nov. 8 was a victory for low-wage workers.

“Minimum wage increases are hugely popular, and I’m not aware of a failed ballot proposal in the past two decades,” Zipperer said.

4. A possible big victory for the unions

Coming out of the pandemic, union support is at an all-time high. More than 70% of Americans approve of unions, a recent Gallup poll revealed.

The outcome of a vote in the midterm elections could accelerate this growth: Illinois voters will decide whether or not to grant workers the basic right to organize and bargain collectively.

If the provision becomes law, “it will demonstrate strong popular support for workers’ rights in a large, important state,” said Daniel Galvin, an associate professor at Northwestern University whose research areas include workers’ rights and labor policy. . “It would also send a signal to the rest of the country that the right to bargain collectively must be considered a fundamental right worthy of constitutional protection.”

5. “Millionaire tax” in California and Massachusetts

Amid the nationwide wave of tax cuts, California and Massachusetts vote Tuesday on whether to pass a “millionaire tax” on high earners.

In California, Proposition 30 would add a 1.75% tax on annual income over $2 million, in addition to the state’s top tax rate of 13.3%, effective March 1. January. The plan aims to fund zero-emission vehicle programs and wildfires. response and prevention.

The Fair Share Amendment in Massachusetts would create a 4% levy on annual income over $1 million, in addition to the state’s 5% flat income tax, also from 2023, with plans to pay for public education, roads, bridges and public transportation.

However, Jared Walczak, vice president of state projects at the Tax Foundation, said he doesn’t believe the proposed millionaire taxes are part of a larger trend at the state level.

Since 2021, some 21 states have reduced personal income taxes, and only one state, New York, and the District of Columbia have increased levies.

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