Looking ahead to the year 2022, especially with the mid-term elections, I have a few predictions I wanted to share that will address paying for the enormous flows of cash into our economic system. I call them the Three I’s.
Interest Rates: the Federal Reserve has been very clear that interest rates will remain at virtually zero for 2021. I think we will see a similar policy in 2022; however, rates will slowly climb in anticipation of increased rates in 2023.
Increase in Taxes: taxes will go up to pay for Covid-related stimulus and infrastructure. My best estimate is that the corporate tax rate will increase from 20% to 28% and the top tax bracket will rise from 37% to 39.6%. Unknown changes are possible in capital gains, estate tax and step up provisions.
Inflation: emerging from the pandemic, with pent-up demand and large amounts of cash pushed into our economic system should mean a moderate increase in inflation.
For most clients, a rise in interest rates will give us more investment options. Inflation and taxes are yet to be determined.
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