Legislation takes time to become realized.
WIth the passing of the “One Big Beautiful Bill” comes many changes and speculation about the tax cuts, benefits cuts, spending changes and the rest of what is included in the 870 pages in this legislation.
One of the aspects to large scale legislation like this and other broad sweeping policies like Secure Act and 2.0 is all the infrastructure adjustments that need to adapt to the laws. This can often prolong the execution of these laws and delay their impact to citizens as all the supporting structures adjust.
There is the obvious structure of the IRS needing to adapt to changes in taxation policy and their collecting of tax returns and revenue collection. You used to get this amount for a Child Tax Credit in 2024 and now you will be getting a different number. Plus, what amount of that particular credit you qualify for also changes. This highlights the fact that our tax situations are always in flux.
Think of all of the tax filing software that is out there and all the tax preparers. They have to adjust and get systems in place and training on the changes.
An example from the Secure Acts is that employees could elect their employer's contribution to their 401(k) to be done on the Roth side. In talking with a variety of financial firms that I use for employee sponsored plans for businesses, none of them immediately had that feature and many still do not. More than likely you have no idea what I am even talking about even though it is part of the rules. Plan documents needed to be updated. Account systems changed. Payroll tax reporting and accounting had to be overhauled. Not simple. Often lengthy.
Laws also “sunset” in that they have a short period of being around before they go away, are continued or amended. It could be the case that laws start to take full effect right about the time they start to fade away.
Finally, because we have midterm elections, laws passed today may be voted down shortly because of a change in party power within the House and Senate. This is one of the unique aspects to our system of government with the hopes that we keep things centered and prevent the pendulum swinging too far in a direction that is not good. This also creates the dance that laws recently approved may be stalled within the next 18 months.
I am of two minds about large legislation like the “One Big Beautiful Bill.”
First and foremost we must be concerned with the ramifications of the policies passed by our lawmakers. Where they disadvantage, create economic disparity, and negatively impact the lives of citizens we must stand up and speak out. More than likely you are seeing projections of potential cuts to all kinds of social programs and maintaining dignity for so many.
Second, I am always curious to see what actually sticks for the long-term and lives long enough to make its way to us as people. In looking at laws passed around taxes and financial accounts, I have seen time and time again they are not actually realized or the effect of them comes way down the line. This hopefully buys the necessary time to evaluate and adapt what is not helpful and prevent bad policy from having actual influence on us.
As always, if you come across a financially related article you’d like to send my way please do!
Best place to send them is to me.
More next time!
Jonathan