As we published this year’s tax guide, taxation was a topic often brought up in news articles and by political commentators. Depending on where the commentary was coming from, the focus was either the Tax Cuts and Jobs Act (TCJA) or proposals from Democratic presidential candidates to change it.

The initial reaction to the TCJA following last year’s tax filing season was not favorable. A Gallup poll published on April 12, 2019, found 49% of respondents disapproving of it. More than one out of five respondents (21%) said their taxes went up as a result of the new law.

Data published by the Internal Revenue Service (IRS) provided some rationale for the survey results. The average refund paid on tax returns filed between January and July of this year was approximately $25 less than last year. Taxpayers with adjusted gross incomes (AGIs) between $75,000 and $250,000 particularly saw the average size of their refunds shrink.

One reason may be the change in how deductions are realized. For tax year 2018, 14.4 million taxpayers in the $100,000 to $200,000 AGI range took the standard deduction. This is far above the 4.7 million who claimed it for 2017. Deductions of state and local taxes fell by about two-thirds last year.

Beyond smaller refunds, there is the issue that the tax cuts are so far not paying for themselves. The U.S. federal government ended its fiscal 2019 with a budget imbalance of nearly $1 trillion. It was the largest deficit in seven years. Economic growth hasn’t taken off like the law’s proponents said it would, though the trade war and weak economic growth abroad have been headwinds.

Contenders for the Democratic nomination have said they want to change the TCJA. The proposal that has gotten the most attention is from senator Elizabeth Warren. She has called for a wealth tax on the most affluent. (Having started my career in finance by valuing privately held businesses, I have reservations about the feasibility of such a tax.) What often seems lost in the conversation is the difficulty of passing major legislation in Congress. What eventually became the TCJA initially faced hurdles even in a Republican-controlled government.

We’re seeing this continue currently. Efforts to adjust the TCJA or even extend its tax cuts have been stymied so far. Tax extenders—which have been rumored to include a rollback of the floor for deducting medical expenses to 7.5% of income from its current 10.0% level—have not made it through Congress.

Even retirement-related legislation with bipartisan support is stalled. The SECURE Act has several positive aspects, including expanded access to employer-sponsored retirement plans and a delay in the age at which required minimum distributions (RMDs) must be claimed. It’s reportedly being blocked over demands to allow parents to use their retirement savings to pay for homeschooling. (While I can understand why some would want this option, I think it’s a terrible idea from a financial planning standpoint.)

A few AAII members have expressed concern about the bill’s requirement that inherited IRAs with balances above $400,000 be liquidated within a period of 10 years. It could be problematic for those of you who have incorporated stretch IRAs into your estate planning. I’ll repeat what I’ve told AAII members who have directly asked me about it: Contact your senator but don’t throw out the baby with the bathwater. The legislation has the potential to help many save for retirement. If it’s just the inherited IRA clause that gives you pause, explain that specifically to your senators.

Speaking of IRAs and distributions, the U.S. Treasury Department has floated a proposal to adjust the life expectancy tables that RMDs are based on. The proposed change reflects longer life expectancies. If enacted, it would modestly reduce the amount retirees are required to withdraw each year starting in 2021. So while it’s neither a political nor a tax change, it could help to keep some of you below certain tax and Medicare premium thresholds.

Finally, with the holidays approaching, please consider gifting membership in AAII to your family and friends. It will help them become financially secure and will help us continue our mission of educating individual investors. You can do so by calling 800-428-2244.

Wishing you a happy holiday season,

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The Individual Investor’s Guide to Personal Tax Planning 2019