What Should I Do Now?

 

December 20, 2017

The tax bill has passed, and as you might suspect my phone is lighting up … “Now that the new bill has been passed is there anything I should be doing for 2018?”

 

Unfortunately there are probably fewer than a couple of dozen people in the country who can answer that question accurately, they all work in Washington DC, and probably half of them are congressional staffers, not members of the congress.  The entire process was cloaked in a high degree of secrecy, and as a result nobody really has a full understanding of what’s in it, and what is an appropriate strategy to deal with it.

 

Here’s the good news … the final product turned out to be a lot better than any of the proposals of even a week ago.  The reconciliation, rather than a strict horse trading compromise between the two bills, improved on both in many respects.   As was unavoidable, there will be losers as well as winners, but it is not a zero-sum game, and the resulting benefit to the economy from the corporate side of things will accrue to everyone’s benefit.  Some will pay higher taxes, but many of those that do are among those who will reap more benefits from improvement in business performance, both in the form of corporate profits as well as investment value.  The demagogues will pitch their class-warfare mantras, but the fact is every segment of the population as a group will pay a lower percentage of their income in federal taxes. 

 

All, that is, except those that already are not paying any income taxes, and the size of that demographic would probably surprise you.  (This factoid is actually a key factor in any balanced, objective philosophic conversation about taxes and tax reform … how do you create a tax policy that benefits those who do not pay taxes without it being a soak-the-rich redistribution of income?  But that’s a discussion for another day.)

 

Back to the opening question … “What should I do now?”.  The answer for most of us is “nothing”.  Again, nobody has had an opportunity to fully vet the bill against the specifics of your individual situation.  There are going to be unintended consequences, and an approach that seems to make perfect sense on the basis of something we might think we know now could turn out to be disastrous in the light of another presently misunderstood or even unknown provision. 

 

Frankly, I’m tired of hearing the President spout his “fake news” mantra, but false or incorrect news has always been a problem.  Reporters often don’t know at all what they are talking about, and even the best informed and most diligent among them sometimes get the story wrong.  I fear this is one of those times.  A lot of what we think we know about this bill will turn out to be wrong.  Patience is essential.

 

Over the next weeks and months we will be doing a more detailed analysis, and we will provide guidance as it becomes appropriate to do so.  I do hope to be able to provide with each tax return this year, a projection of the effect of the changes on your 2018 situation.  Maybe a good reason for those of you who don’t have their taxes done here to consider doing so, especially if you usually do it yourself.  In the meanwhile, take whatever you hear from whatever source with a healthy dose of salt.  You probably will come out better than you expected.

 

Jim Denton

 

The observations and opinions expressed in this commentary are those of the author and do not necessarily reflect the views of LPL Financial. This commentary is for general information only and is not intended to provide specific advice or recommendations for any individual. Income Tax services provided by DFS Advisors, LLC are conducted as an outside business activity separate and distinct from our relationship with LPL. LPL Financial does not provide tax advice or services.