White House Considering Tax Break to Boost Stock Ownership
President Donald Trump has spoken about “tax cuts 2.0” ahead of the election, which he’s advertised as specifically for the middle class. At least one part of the forthcoming tax package would aim to increase the number of Americans benefiting from the stock market’s record run (and lower their taxes).
The American tax system already does incentivize investment by allowing workers to invest up to $6,000 into an IRA each year (which reduces taxable income by the amount invested). Tax cuts 2.0 aims to nearly triple the total amount that individuals can invest tax free.
According to CNBC: A household earning up to $200,000 could invest $10,000 on a tax-free basis, although officials noted these numbers are fluid. “Nothing’s ruled out,” said one senior administration official. “Nothing’s been ruled in, either.”
After the Great Recession, the percentage of American households owning stocks fell to 52% from 62% before the crisis, according to Gallup. That percentage reached 55% in 2019, a year when the stock market hit record highs.
Both National Economic Council adviser Larry Kudlow and VP Mike Pence have suggested that the tax package could be released by September.
While no shortage of left-leaning pundits and economists predicted doom in the event of a Trump presidency, the market’s performance under Trump is more than doubling the average of past presidents. By year-end 2019 The S&P 500 has returned more than 50% since Trump was elected, more than double the 23% average market return of presidents three years into their term.
Unsurprisingly, zero of the CEOs of S&P 500 companies have donated to the Bernie Sanders campaign.
Those are the statistics for the S&P 500 index, which has been outperformed by the tech-heavy NASDAQ index that is up over 80% since election day. The large-cap heavy Dow Jones Industrial Average has largely performed in tandem with the S&P.