To say that America has undergone some significant tax reform in the least several years would be an understatement, and there’s the Tax Cuts and Jobs Act of 2017 to largely thank for that. And while you weigh common tax season dilemmas like whether to itemize or take the standard deduction this year and continue to navigate through the changes that are now in their sophomore year since the aforementioned Act was passed, there could be a new incentive coming down the pike in the not too distant future.
What’s that potential tax incentive, you ask? Stocks.
That’s right — stocks. Current reports suggest that the White House is mulling over items to package into an economic stimulus package that also includes a number of proposed tax cuts. Among the items that are reportedly being weighed include tax incentives to encourage more Americans to invest in the stock market. Here’s a look at how stock market-related tax incentives might look under this proposal:
Tax Incentives for Stock Market Activity?
Curious how a tax incentive for being more active in the stock market might work? While the government is still reportedly exploring its options on this, here is the most likely scenario should this take effect:
A portion of household income may be treated as tax-free dollars so long as it is invested in the stock market outside of a traditional 401K retirement plan.
This would incentivize Americans to grow their wealth via the stock market, and also ensure continued stock market growth as certain indicators have shown that a decade-long economic expansion could be nearing a stopping point. Furthermore, it’s worth noting that diversifying your portfolio is one of the keys to growing your wealth, so encouraging more Americans to purchase stocks could be that nudge they need to prosper.
Political Ploy or Realistic Venture?
It’s worth noting that any stimulus package such as what we’ve described here would need to pass Congress in order to be signed into law, and that’s likely to be a tall task currently with Democrats controlling the House of Representatives. However, it does provide a talking point for President Donald Trump as he makes his bid for reelection next fall, as he can hammer home the point that he wants to put more money back into Americans’ pockets and keep the economy humming rather than risk handing it over to a Democratic regime that would likely re-introduce higher taxes and more regulation.
So the answer to the question in the header is “both,” however the political ploy will likely have to be realized first before it’s to become a realistic venture. That is, President Trump would need to be reelected, and the House of Representatives would need to be under Republican control once again (not to mention Republicans would need to keep control of the Senate). Otherwise, this is unlikely to occur.
