With the COVID-19 pandemic severely affecting the nation, Congress has allowed for over $3.6 trillion in stimulus spending. And, it’s likely that it will spend more in the coming months. While the stimulus money is definitely helpful for those who need it, it’s not good for the federal debt, which is expected to jump over $2 trillion as a result of stimulus spending.
With the national deficit expected to be higher than it has been in decades, many are wondering what can be done to remedy or at least start to remedy the situation. Some of these same people are also fearful that the answer could be something no one wants to hear: more taxation.
Increased Payroll Taxes
One suspected way to recuperate would be in the form of higher payroll taxes. These funds could then be used to finance Medicare and Social Security, which could start to run short of the money needed in the coming years. However, an increase in taxation isn’t viable right now with so many people and businesses struggling to stay afloat. So, if it happens, it’s probably not likely for several more years.
The VAT
Others are predicting and supporting the possibility of a value added tax (VAT). Similar to a national sales tax, this tax could raise around $1 trillion if taxed at only 10%. This tax would likely apply mostly to higher-earners, which could help to protect those who have already been the most impacted by the pandemic.
Ultimately, these are just two possibilities. Nothing has been set in stone yet. One thing is for certain though: the nation is going to take a long time to recover from this pandemic - if it ever fully does.
Even though the future is unclear, there is no
more important time for people to work with financial professionals to
safeguard themselves and their futures as much as possible.
