Four Essential Questions You Should Ask Your Tax Professional This Season Related to COVID-19

Good tax professionals ask the right questions to ensure they understand your situation and can help you to the best extent the law allows. Given the host of pandemic-related tax changes for 2020, it’s good to keep these four questions below in mind. If your tax preparer doesn’t ask these questions in your tax organizer or during a meeting, raise them yourself.

1. Did you receive your stimulus payment?

Not everyone received all the stimulus they were entitled to. As a result, the amount of your stimulus payments needs to be reconciled on your 2020 tax return to calculate if you qualify for the Recovery Rebate Credit.

The way the Recovery Rebate Credit works is that if you qualified for stimulus payments but didn’t receive them, then you’ll receive a credit on your 2020 tax return. On the other hand, if you received too much, there is no impact to your refund or balance due. You can’t lose here, so make sure you discuss your stimulus payments.

2. Did you work remotely? If so, when and where?

As a result of the pandemic, a lot of people worked from home for all or part of the year. If you lived in the same state you worked in, then there’s no cause for concern or further investigation. In situations where workers lived and therefore worked remotely in a different state than they normally would have commuted to when going into the office, then there could be an issue.

If you worked from another state for any part of the year, make sure you ask your tax preparer about this so you can understand the filing requirements in each state and any nexus issues. Just remember that if you are a W-2 employee, it doesn’t matter if you worked from your home, there is no home office deduction unless you’re self-employed.

3. Did you take any distributions from your retirement accounts in 2020 due to COVID-related circumstances?

Typically, early distributions from tax-advantaged retirement accounts such as 401(k) and IRAs are subject to a 10 percent penalty. There are provisions in the law that allowed penalty-free distributions in 2020 under certain circumstances related to COVID-19. Also, the income from distributions is spread over three years, which can further reduce the overall tax rate (unless you elected to tax it all in the year of distribution).

If you took distributions from a retirement account and were impacted by COVID-19, make sure your tax professional is aware of these exceptions; and ask the right questions to see if you qualify for any of the preferential treatment.

4. Are you self-employed and missed work because you were sick with the coronavirus or needed to care for someone who was ill with it?

Under the Families First Coronavirus Response Act (FFCRA), those who are self-employed can be eligible for sick and family leave credits if they or a family member had coronavirus and couldn’t work between April 1 and Dec. 31, 2020, as a result. If eligible, your tax preparer will file Form 7202 with your Form 1040 to make the claim.

Conclusion

Doing the best as a tax preparer means knowing your client’s situation and circumstances. There’s a good chance your tax professional is already on top of the COVID-19 changes, but it’s good to keep the questions above in mind just in case.

Some Businesses Rely on Line of Credit to Escape Damages Caused by Pandemic

As businesses attempt to work their way through to a post-pandemic world, there are various means to bridge the financial gap. As recommended by the U.S. Small Business Administration (SBA), some companies can use a line of credit to reach international customers or opportunities outside the United States to make up for the damage COVID-19 caused with fewer domestic sales. How can businesses use a line of credit to increase their chance of survival and pivot to profitability as we move through 2021?

According to Debt.org, a business line of credit functions like any other line of credit that uses revolving debt. Businesses use a portion of their line of credit to meet financial obligations and repay based on the lender’s terms. Common lines of credit borrowing limits can range from $1,000 to $250,000 and are generally not secured against the business’ assets, accounts receivables, etc.

As a U.S. Bank study found, via the National Federation of Independent Businesses (NFIB), 82 percent of companies that go out of business do so because of inadequate cash flow management. The NFIB and U.S. Bank study explains that an inability to purchase inventory, satisfy employee payroll, on-board workers, or obtain some sort of financing increases the likelihood of a business failing.

However, businesses that are approved for and use a line of credit for meeting payroll, purchasing raw materials and items necessary to keep their business running (including rent or lease payments), greatly increases the business’s chance of survival. So, as revenues and profits shrink, employers can tap their line of credit to increase the chances of surviving.

Business Survivability Considerations

Continuous access to funds allows owners to have greater control over a business’s finances and helps them make better growth-driven decisions. For example, Noam Wasserman, a Harvard Business School professor, explains that oftentimes outside investors force founders out of their company – only half of founders were still the CEO three years after the business’s inception. If a line of credit gives the business enough financial flexibility, then the founders can stay in control.

Another way to leverage a line of credit is highlighted in the SBA export assistance programs due to COVID-19-related losses. Small business owners that export products directly, or indirectly to a third party that does the exporting, may be eligible.

Prior to a company completing a sale to an international client, or for prospecting for new international export markets, businesses can apply for a line of credit or a term note, up to $500,000, under the SBA’s Export Express loan program.

Through the SBA’s Export Working Capital loan program, approved applicants can obtain as much as $5 million in financing or a revolving line of credit related to the firm’s export-related business. This assistance also can help businesses better fulfill export orders as well as provide financial assistance for additional ex-U.S. sales. The financing can assist in keeping international orders through more favorable payment options for their foreign customers.

While there is never a guarantee that a business will survive, today’s companies that take advantage of different lending options, such as a line of credit, have a better chance to set themselves up for the post-COVID-19 recovery.

Sources

https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

Personal Lines of Credit

Why Do Small Businesses Fail?

https://hbr.org/2008/02/the-founders-dilemma

How Will Surging Oil Prices Impact the Economy in 2021?

Now that the Keystone XL pipeline is being shut down and southern parts of the United States are experiencing extremely cold weather, how will increasing oil prices impact the economy as the COVID-19 vaccine is being rolled out?

With West Texas Intermediate (WTI) crude closing at $58.22 per barrel on Feb. 11, 2021, and likely higher due to the cold snap in the United States, the price of oil is expected to impact the U.S. and global economy.

Consumer Demand

One of the major impacts of increasing oil prices is the rising price of gasoline. With higher oil prices rippling throughout the economy, understanding how it impacts consumers is one way to see how the economy in 2021 is likely to perform.

As the Federal Reserve Bank of San Francisco points out, there’s a close correlation in pricing between gasoline and crude oil pricing. They point out that WTI and what American consumers pay for gasoline to fill up their car track each other quite closely — as oil prices increase, so do consumer prices for gasoline.

Historic Price Trends in Relation to Today

When it comes to looking at how oil prices impact inflation, looking at historical prices gives helpful insight. In the 1970s, the price of oil increased tenfold, from $3 in 1973 (pre-oil crisis) to more than $30, due to Middle East tensions in 1978-1979 resulting from the Iranian Revolution, according to The Federal Reserve and the U.S. Energy Information Administration (EIA).

However, as time progressed beyond the two oil crises of the 1970s, this correlation became weaker. When the 1980s began, so did the association between oil prices and rising inflation. The U.S. Bureau of Labor Statistics (BLS) explains this rapid increase in the cost of oil drove the consumer price index (CPI), one way to measure inflation, from 41.20 in the beginning of 1972 to 86.30 as 1980 came to a close. As the BLS illustrates how the 1970s experienced high inflation, it took three times as long (24 years) for the CPI to double between 1941-1971.

With the two Oil Shocks passed, the 1980s and the 1990s ushered in a new divergence of how oil prices ultimately impacted what consumers paid for oil and oil-dependent products. This is illustrated by looking at the impact of the Producer Price Index (PPI), or wholesale cost, versus how consumers ultimately felt, or the Consumer Price Index (CPI).

CPI and PPI Data and Oil Prices

Looking at the CPI, especially in the 1990s, statistics from the EIA show that the price per barrel of crude oil went from $14 to $30 in six months. However, data from the BLS shows that CPI started at 134.6 in January 1991, eventually reaching 137.9 in December 1991.

Later, from 1999 to 2005, the EIA’s data shows the price of a barrel of oil jumped from $16.50 to $50. While the price nearly tripled, the BLS’ CPI jumped from 164.30 in January 1999 to 196.80 in December 2005, an increase of 33.5 over nearly six years.   

Looking at the Producer Price Index (PPI) data, per the Federal Reserve Bank of St. Louis, from 1970 to 2017, the correlation was 0.71. For the CPI, during the same time frame, it was only 0.27. The difference between the CPI and PPI, according to the Federal Reserve Bank of St. Louis, is due to the higher proportion of services provided in the United States, which are less oil-reliant for raw materials.

External Factors

With the expected relief payment of $1,400 per individual and additional money allotted for dependents, coupled with continuing vaccinations and the reopening on the U.S. and global economies, there’s much stimulus expected to provide consumers with a financial cushion. However, with the increased spending by the federal government and pressure on the U.S. dollar, only time will tell how the price of crude oil will impact consumer spending and company earnings.

The Impact of COVID on Life Insurance

If someone you know died from COVID-19 and had an existing life insurance policy, there should be no problem receiving the death benefit. The terms of a life insurance contract cannot be changed after purchase, so anyone with a policy before the pandemic will continue to be covered as long as premiums are paid.

However, the life insurance industry is in a quandary right now when it comes to new applicants applying for policies.

Some insurers have placed an age limit on applicants to whom they will sell policies. Travelers who have recently visited countries with a significant outbreak and people currently infected with the virus are generally asked to wait until after they have quarantined or recovered to apply for life insurance. While the coronavirus has had a high fatality rate among people age 65 and older, the death rate has fluctuated among demographics over the past year as the virus spread from metropolitan areas to more rural parts of the country.

With this in mind, now is probably one of the most challenging times to apply for a life insurance policy. In the past, applicants have had to answer standard questions regarding their medical history. Today, most also will have to disclose if they have been treated for COVID-19. Bear in mind that even people who did not become severely ill could suffer medical conditions in the future resulting from the infection. However, it is best to answer that question honestly, because any future claims could be denied if it is found the applicant lied about his or her COVID experience on the application.

As the data continues to be assessed, it is likely that insurers will adjust their terms and rates in response to the recent pandemic. It is possible, in fact quite probable, that data pointing to enduring effects of COVID-19 will be included in life insurance underwriting standards in the future. This could increase premiums for COVID-19 survivors – or result in denial of coverage altogether.

In the past, there were life insurers that sold low-cost, low-payout policies without a medical exam or extensive health questions. But these days, given how quickly the coronavirus can take a life, applicants age 60 and older would be hard-pressed to qualify for one of those “guaranteed issue” policies.

In fact, pre-existing health conditions such as diabetes and asthma – which are highly susceptible to the ravages of the coronavirus – may undergo more scrutiny in the future. While pre-existing conditions are no longer a qualifying issue for health insurance, they are very much a part of the life insurance underwriting process and do increase individual premiums.

There is one silver lining for life insurance applicants: Some insurers have eliminated the normally required physical exam due to social distancing restrictions. Others have opted to postpone the in-person exam but offer immediate temporary coverage with a limited death benefit. A couple of life insurers in Connecticut and Massachusetts even offer a free, three-year term life policy to frontline workers in appreciation for their work during the pandemic. Eligible applicants include in-hospital personnel and first responders who have the greatest risk of exposure to the coronavirus.

Anyone who has lost their income due to the pandemic and is in danger of not being able to pay life insurance premiums should call their carrier to see if there are options to continue coverage. Some companies have agreed to defer premiums for up to 90 days rather than cancel coverage for people likely to find employment soon. It’s a good idea to call and find out rather than miss payments and hope your insurance company chooses not to notice.

5 Cities Rank as Ideal Locations for Remote Workers

According to the National Bureau of Economic Research, in late spring of 2020 about half of American workers were working from home. Not surprisingly, many researchers believe that this pattern will continue after the pandemic is over. With this in mind, SmartAsset has examined the best cities to work from home in 2021 and evaluated them across seven metrics: percentage of those who worked at home; estimated percentage of those who can work at home; five-year change of percentage of those who worked at home; October 2020 unemployment rate; poverty rate; housing costs as a percentage of earnings; and percentage of residences with two or more bedrooms. Here’s what they learned:

  1. Scottsdale, Arizona. In 2019, Census Bureau data shows that about 18 percent of people worked from home, a 6.7 percent increase from 2014. This sunny city also has the fourth-highest estimated percentage of workforce who can work from home and the third-lowest 2019 poverty rate, which is 6 percent. When you’re not inside at your computer, you can enjoy the desert tranquility of the McDowell Sonoran Preserve, restaurants and shops of Old Town Scottsdale, and the largest model train display in North America at McCormick-Stillman Railroad Park.
  2. Raleigh, North Carolina. Even before COVID-19, a large percentage of people worked from home here, much like Scottsdale. In 2019, 10.5 percent of the workforce did so remotely, which is the fourth-highest for this metric. Raleigh also ranks in the top quartile for two other metrics: it has the 18th-lowest October 2020 unemployment rate (5.3 percent) and 21st-lowest poverty rate (10.9 percent). Raleigh is known as the “city of oaks,” which makes it a beautiful place to live. Even better, you can celebrate all four seasons and it’s only a few hours from the mountains. Plus, homes are some of the most affordable in the nation.
  3. Plano, Texas. Just north of Dallas, Plano ranks in the top 10 percent for three metrics: percentage of people who worked from home in 2019 (9.6 percent), estimated percentage of people who are able to work from home (35.44 percent) and 2019 poverty rate (7.5 percent). Also, Plano has the 14th-lowest October 2020 unemployment rate, at 5.2 percent. Best thing about Plano: it has all the restaurants, shops and amenities of Dallas without the traffic. And, there are numerous parks for walking, hiking, biking and swimming.
  4. Gilbert, Arizona. This locale ranks as one of the best places to buy an affordable home. In fact, data from the Census Bureau shows that 96.3 percent of apartments and homes in Gilbert have two or more bedrooms, which is the highest percentage for this metric. Additionally, it has a relatively low poverty rate (4.6 percent). Main attractions include bird watching at the Riparian Preserve at Water Ranch, holiday shows at the Hale Centre Theatre, and delicious produce at the Gilbert Farmer’s Market.
  5. St. Petersburg, Florida. As of October 2020, the greater Pinellas County unemployment rate was just 5.2 percent. That’s 1.5 percentage points below the national average. What’s more, the percentage of people working from home grew by 4.6 percent in St. Petersburg from 2014 to 2019, the third-highest increase in the study. If you love sugar-sand beaches, you’re in luck: there are many to fall in love with. But you can also enjoy cultural outings like a visit to the Dali Museum and the Chihuly Collection.

Some of the other best cities for working remotely include Durham and Charlotte, North Carolina; Colorado Springs, Colorado; Austin, Texas; and Fremont, California. These days, working from home is the rule, rather than the exception it was years ago. In these challenging, uncertain times, it’s nice to know there are places you can thrive.

Sources

https://smartasset.com/checking-account/best-cities-to-work-from-home-2021

https://www.tripadvisor.com/Attractions-g31350-Activities-Scottsdale_Arizona.html

https://www.raleighrealtyhomes.com/blog/moving-to-raleigh.html

Securing Jobs for Cabinet and Congress Members, Inspector Generals, and Apprentices – and Honoring Capitol Police Officer Eugene Goodman

To provide for an exception to a limitation against appointment of persons as Secretary of Defense within seven years of relief from active duty as a regular commissioned officer of the Armed Forces (HR 35) – Prior to passage of this bill, a former service member could not be appointed as Secretary of Defense until separation from active duty for at least seven years. This legislation allows someone to be appointed after only four years from active duty as a commissioned officer of a regular component of the Armed Forces. The bill was introduced by Rep. Adam Smith (D-WA) on Jan. 15, passed in the House and the Senate on Jan. 22 and signed into law by President Biden on Jan. 22.

Officer Eugene Goodman Congressional Gold Medal Act (S 35) – This act authorizes awarding the Congressional Gold Medal to Capitol Police Officer Eugene Goodman for his actions to protect the Senate chamber during the Capitol security breach on Jan. 6. It passed in the Senate amid a standing ovation. In addition to Officer Goodman’s recent promotion to acting deputy sergeant-at-arms for the Senate, this medal represents the highest honor Congress can bestow. The act was introduced by Sen. Chris Van Hollen (D-MD) on Jan. 22, and passed in the Senate on Feb. 12. The House is also considering plans to honor the officer.

National Apprenticeship Act of 2021 (HR 447) – This bill was introduced by Rep. Robert Scott (D-VA) on Jan. 25. The purpose of the legislation is to amend the 1937 National Apprenticeship Act to include youth apprenticeships, and for other purposes. The legislation authorizes the establishment of criteria for quality standards, apprenticeship agreements and acceptable uses for grant funds awarded under this act. The bill passed in the House on Feb. 5 and is currently in the Senate for consideration.

Inspector General Protection Act (HR 23) – This act requires the president to notify Congress any time an inspector general is placed on nonduty status, and to nominate a new inspector general within 210 days after a vacancy occurs. Otherwise, within 30 days after the end of that period, the president must explain to Congress the reasons why there is not yet a formal nomination, with a target date for making that nomination. The bill was introduced by Rep. Ted Lieu (D-CA) on Jan. 4. It passed in the House on Jan. 5 and is currently under consideration in the Senate.

Regarding consent to assemble outside the seat of government (H.Con.Res. 1) – In light of the disruption of Congressional duties due to the coronavirus, the House passed this concurrent resolution authorizing the Speaker of the House and the Majority Leader of the Senate to assemble the House and the Senate outside the District of Columbia whenever the public interest warrants it. Introduced by Rep. James McGovern (D-MA), this bill was both presented and passed in the House on Jan. 4. It is currently under consideration in the Senate.

Congressional Budget Justification Transparency Act of 2021 (HR 22) – This bill was introduced by Rep. Mike Quigley (D-IL) on Jan. 4 and passed in the House the next day. It would require federal agencies to make budget justification materials accessible to the public on a website managed by the Office of Management and Budget. Available information should include a list of the agencies that submit budget justification materials to Congress and the dates they were submitted, with links to the actual materials. This bill is currently under review in the Senate.

Paying the Price for Vice: The Evolving Landscape of Excise Taxes in America

While excise or vice taxes have long been a part of the American tax landscape related to alcohol and cigarettes, the recent invention of vaping and legalization of marijuana and other substances is changing the landscape.

What Are Excise Taxes?

Excise taxes are taxes on specific types of consumable products such as alcohol or tobacco for one of two reasons. First, as vice taxes in order to raise revenue to cover the costs related to consumption; and second, to deter consumption itself. Unlike other types of consumption taxes such as sales tax, these are specific to certain products.

Do They Change Behavior?

Theoretically, when you increase the price of a product such as alcohol through the addition of excise taxes, demand should go down. While this may be a deterrent and limit demand, excise taxes certainly haven’t proven to be a feasible way to eliminate behaviors. A pack of cigarettes can cost upward of $15 in major cities, but there are still people smoking. It’s a similar situation with drinking and gambling.

It’s All About the Benjamins

While we think of excise taxes as vice taxes today in many respects, the main point isn’t to change behavior – it is to raise revenue. Excise taxes pre-date the United States and were one of the main forms of government funding in America before income tax was created. Alcohol taxation goes back to George Washington’s presidency and incited the infamous Whiskey Rebellions. Cigarette taxes were introduced as a way to pay for the Civil War. In the end, it’s about the money generated as there are easier and more effective ways to regulate behavior.

New Products Equal New Taxes

The legalization of marijuana by states raises the issue of excise taxes on this product. Unlike tobacco, where one of the goals is to decrease consumption, the situation here is more one of legalizing something to raise consumption and generate revenue as a result.

Marijuana taxation is more akin to alcohol in the years following prohibition. In both cases, you have large-scale illegal operations and illicit consumption with the aim of moving them to legitimate status. In this sense, it’s different than other vice taxes. 

Initially, at least, the authorized market will have to operate in parallel with the black market for the same product, limiting the amount of taxes that can be raised when there is still an unregulated and untaxed alternative.

Beyond Marijuana

Aside from marijuana, there are other new products that could be taxed and generate revenue, the most notable being vapor products. While vaping products are not really that new, the market is just growing to a substantial size.

Taxing vaping products is more complicated and problematic. Some consider these products to be just as harmful as cigarettes, while others not so much. There is evidence that nicotine consumed via vaping is less harmful than through smoking cigarettes.

Theoretically then, the government should apply less taxes as a result if the harm and therefore cost to society is less.  The problem with this is that less revenue is raised. As noted before, we come back to the issue that vice taxes are often revenue-raising tools disguised as public safety measures.

Too Successful For Its Own Good

Vice taxes can be too successful, with tobacco as the best example. While people may stop buying cigarettes, they don’t stop consuming cigarettes; instead, they buy them elsewhere.

For example, more than 50 percent of cigarettes consumed in New York are purchased out of state. If you push too far, people will react.

Conclusion

Excise and vice taxes are here to stay. While varying arguments can be made that they benefit society by shaping behaviors, it is undeniable that state, local and the federal government are addicted to the revenue generated.

COVID-19 Vaccination Considerations for Employers

Looking at a 2009 letter from the U.S. Department of Labor, Occupational Safety and Health Administration (OSHA), employers may be able to require their employees to take the COVID-19 vaccine, with a few exceptions (such as the likelihood of a life-threatening reaction to it). With the COVID-19 vaccine being rolled out, how can employers balance workplace safety, maintain productivity and stay within the law?

According to the Centers for Disease Control & Prevention (CDC), the early vaccination stages will likely focus on those who are at particular risk of severe and life-threatening complications from COVID-19. This is expected to include elderly individuals, especially those who live in nursing homes. It’s also expected to include frontline healthcare workers who may be exposed to COVID-19 and could expose patients to COVID-19.

Looking to the Past for Guidance on Employer Vaccine Mandates

The natural question for employers is if and how they are able to mandate a COVID-19 vaccination for employees. When it comes to OSHA and the U.S. Equal Employment Opportunity Commission (EEOC), neither agency has given any actionable guidance on mandating the COVID-19 vaccine.

In light of an Emergency Use Authorization (EUA) for both the Pfizer and Moderna vaccines, further government agency direction is likely to follow over the next few months. Until there is more definitive guidance, the most relevant and likely direction is to look back at how the different agencies handled this same question with the H1N1 epidemic.

U.S. Equal Employment Opportunity Commission

In 2009, the EEOC provided guidance based on the Americans with Disabilities Act (ADA) and Title VII of the Civil Rights Act of 1964, which state that employers are within their right to mandate that workers take the flu shot. However, for workers with disabilities that prevent them from receiving inoculations and for workers objecting to vaccines according to their religious beliefs, their employer must provide a “reasonable accommodation.”

If a reasonable accommodation is available, the employer is responsible for providing it. However, according to the ADA, if a reasonable accommodation is not available; it would create an “undue hardship” for the business; or if the worker would “pose a direct threat” to their coworkers’ well-being and welfare that isn’t able to be reduced via the reasonable accommodation, employers aren’t required to provide that reasonable accommodation.

When it comes to the subjective reasonable accommodation and undue hardship test, the employer must look at the worker’s individual disability, his role and what responsibilities it entails, the type of vaccine being mandated, and the employer’s circumstances. For example, if someone cannot be vaccinated, they may be accommodated by continuing to work remotely, work within the constraints of social distancing guidelines, face masks, etc. However, if the worker’s role requires close contact with others, the ability of the employer to accommodate the employee will be more in question.

Title VII similarly requires business owners who mandate vaccines as a requirement of employment to make reasonable accommodations for workers who assert a sincerely held religious belief, practice, or observance that prevents the worker from accepting a vaccine. In this case, employers may ask the employee who claims a religious exemption for reliable documentation attesting to the religious objection.

Much like the ADA, Title VII also states that if the reasonable accommodation causes an undue hardship, the employer is not required to make such an accommodation. One distinction for this exception under Title VII is that the undue hardship standard is met when the “more than de minimis cost” to the business is reached. For the ADA’s undue hardship threshold to be met, the accommodation in question must create significant difficulty or expense. For employees who have non-religious beliefs that they explain prevents them from taking a vaccination, this is not covered under Federal Law but might be applicable in certain states.

Looking back to 2009, an OSHA letter stated that businesses can require employees to take a seasonal flu vaccine, with some caveats. One exception is if they have a pre-existing medical condition that can cause grave illness or death, they may qualify for an exemption. As the EEOC suggests, asking and not mandating that employees get vaccinated might garner good results before there’s any pushback from a vaccination mandate.

Businesses can offer vaccines at their place of work, paying for it for every employee who wants it. However, in the course of offering vaccines for workers, logistics must be considered because things are still evolving as the two vaccines (and others) are projected to become more and more available. Employers must consider the time frame of availability for vaccines (depending on the business’ industry, workers’ ages, etc.), pay for time spent on vaccination (potentially if there’s a reaction, etc.), how payment for vaccines will work, delivery and storage of the vaccine, etc.

While the rollout for the COVID-19 vaccine is ongoing, now is the time for employers to determine how they will handle the inoculation with their employees. 

Sources

https://www.osha.gov/laws-regs/standardinterpretations/2009-11-09

https://www.eeoc.gov/laws/guidance/pandemic-preparedness-workplace-and-americans-disabilities-act

https://www.eeoc.gov/foia/eeoc-informal-discussion-letter-254

How Will the Biden Administration’s China Policy Impact Markets?

The Obama and Trump administrations couldn’t have had a more different approach when it came to U.S. relations with China. As the Institute for China-America Studies (ICAS) explains, under the Obama administration, the United States favored a trade and investment approach when dealing with China, while the Trump administration had a national security focus. The ICAS believes the Biden administration will address trade and economic imbalances through a modified approach, including reducing tariffs on imported Chinese goods over time to decrease inflation for American consumers. Another example is maintaining pressure on China to cut government subsidies for competing industries, currency games, and exporting products to the United States at artificially low prices.

While the Obama administration engaged China through trade and investments, it didn’t emphasize engaging the country on the national security side. The Trump administration looked to make American industries independent of Chinese production, especially for rare earth metals, pharmaceutical precursors, etc. With the inauguration of President-elect Biden, the incoming administration is expected to maintain the Trump administration’s quest to give many American industries a fighting chance of survival, albeit how it will be accomplished will likely vary.

The Biden administration is projected to lower tariffs on Chinese imports gradually. This is expected to be done to reduce the tension of the existing trade war. It’s also expected to be done to lower the rate of inflation and help businesses that import input materials from China.

Based on statistics according to the American Action Forum, approximately $57 billion was paid by consumers on an annual basis per 2019 import numbers, due to tariffs instituted by President Trump. This action is likely to increase consumer spending and increase companies’ earnings. However, the Biden administration is still expected to keep other forms of trade pressure on what many believe are unfair trade practices by China.

Biden also is expected to raise the same concerns the Trump administration did regarding Chinese trade and commerce, including China subsidizing its industries, flooding the American market with goods to undercut American producers, and requiring so-called forced technology transfers from U.S. companies.  

However, the trade deficit the U.S. has with China isn’t expected to see much attention. This could negatively impact how much China is ultimately expected to import from the United States.

When it comes to colleges and universities, research-based collaboration, and artistic-based areas, relations are expected to be more friendly. However, when it comes to fighting China’s human rights violations, individuals or business entities might be targeted. Based on Vice President-elect Kamala Harris’ proposed Uyghur Human Rights Policy Act of 2020, there’s an expectation the Biden administration will keep the pressure on China.

Beginning in 2017, Biden began to discuss plans for America and how some of America’s crucial industries could be more self-sufficient and less reliant on China. Examples include pharmaceutical products, medical equipment, and rare earth minerals.

Potential actions the Biden administration could implement against China include sanctions; U.S. government-sponsored legal action against Chinese firms; and becoming more involved in the World Trade Organization (WTO) and similar organizations. This is seen by some as the U.S. becoming more in-step with Europe to better pressure China in WTO and related disputes. It might also include courting America’s allies in reducing or prohibiting Chinese investment of domestic industries to make it more difficult for Chinese firms to obtain cutting-edge technology.

While there is no way to accurately predict how the Biden administration will treat China, there will likely be continued pushback on China. How these actions will ultimately impact trade and the markets will be seen in the near future.

What To Know About Filing For Bankruptcy

About one million Americans file for personal bankruptcy each year, with one in 10 households having filed at some point. Given the loss of jobs, reduced income, and the coronavirus recession in 2020, those numbers could increase this year if the economic recovery is not both swift and omnipresent.

There are two main types of personal bankruptcy: Chapter 7 and Chapter 13. Chapter 7, which is the more common option, will liquidate the filer’s assets in order to discharge all or a portion of the outstanding debt. People generally choose this route because they are in way over their heads and do not earn enough income to pay their debts in any type of normal time frame.

Chapter 13, on the other hand, provides some immediate breathing room while helping the filer develop a payment plan based on a reduced percentage of the debt. This percentage is determined by how much he makes and what he can feasibly pay each month. While a Chapter 7 bankruptcy remains on your credit report for 10 years, while Chapter 13 bankruptcy is a bit less punitive staying on record for only seven years. As the filer works to pay down his debt and sticks to his plan, his credit score will gradually improve over time. In some cases, the debtor may be able to apply for an FHA, VA, or USDA home loan a year after his bankruptcy filing, or two to four years if applying for a conventional mortgage.

Bankruptcy can provide immediate relief from creditors calling and threatening to evict, foreclose, repossess, shut off, or garnish wages. However, be prepared for some level of pain, such as the bankruptcy court seizing property to be sold to pay your creditors, and/or your credit cards being canceled.

You may see television ads to get debt relief without having to file bankruptcy. Be aware that while these programs may negotiate a debt settlement to something you can better afford, they will not skirt the wrath of the dreaded credit rating agencies. Any time an entity negotiates a reduction in your debt, this will show up as a negative factor on your credit score, and will likely remain that way for many years. A more recent issue that not everyone is aware of is that some employers have started checking the credit reports of job applicants. This makes it all the more difficult to pay off your debt if you can’t get a job because of your past payment history. Your best option is to secure a reliable income before you work with a debt relief agency or file for bankruptcy.

Before entering any type of debt relief program, it’s a good idea to consult with a qualified, non-profit credit counseling agency for a free debt analysis. Don’t go to just anyone; make sure it is a legitimate resource which, by law, is required to serve your best interest. Shady debt counseling vendors are inclined to recommend a debt solution that works out better for the agency than their clients.

If you do decide to file for bankruptcy, be aware that court fees cost about $300, plus lawyer fees tend to run between $1,000 and $3,000 for a Chapter 7 filing and approximately $3,000 to $6,000 for a Chapter 13 filing.