In the recently passed Bipartisan Budget Act of 2015, Congress did some things that could be considered game-changers. Here’s a few of them that I think could be significant to my constituents (it’s a political year, and I couldn’t resist the word choice).
For the first time in years, Congress passed a budget bill that won’t require an annual battle over the details. The spending cap is set for the next two fiscal years. We won’t have a fight just to keep the government functioning, providing some stability. Stability breeds confidence, thereby potentially improving the likelihood of investment spending, a factor contributing to one of America’s long-run challenges.
We posted an article about questionable Social Security Timing strategiesi and the seminars used to promote them earlier this year. These “unintended loopholes” are closed, effective early in 2016. This act created a tremendous outcry in our industry, but I believe that Social Security should be perceived as a safety net for the less fortunate.
This change should remind all of us that “what Washington gives, it can take away”.
The energy sector accounts for about 1 in 10 dollars of our national economy, and with the worldwide glut of oil driving crude prices towards the lowest prices seen this century, this sector of the economy is reeling. This act eliminated a four-decade-long ban on export of crude oil from the USA. Adding American oil to the world’s supply could improve our trade balance while potentially stabilizing prices.
In exchange for removing the crude oil export ban, the renewable energy industry received a five-year extension of the massive tax credits currently in place to promote solar panels and windmills for producing electricity. It’s been estimated that this tax extension will create more new renewable energy capacity than the entire world agreed to in the recent global climate change agreement.
More important to the economy is the number of jobs protected by the extension. Solar panels, without the tax benefits, have too long of a payback period to be cost effective on their own right. But with a 30% tax credit, the analysis makes a lot more sense, both for the homeowner as well as the commercial, industrial installation.
Additionally, through the Protecting Americans from Tax Hikes (PATH) Act of 2015, Congress makes permanent some substantial tax benefits. IRA Charitable transfers, education tax credits, state sales tax and schoolteachers’ supplies deductions, plus many other benefits will no longer be part of the annual battle to resolve the government’s spending plans.
Finally, they’ve also improved the Section 529 College Savings Plans definitions of “qualified distributions” to include Computers! They also now allow refunds paid by the institution to be redeposited back into the account.
The bi-partisan agreements, reducing the need to revisit each tax benefit every year, are signs that the game in Washington is changing. For the first time in years, I believe that the changes are good.