Triple B: BBB
In the world of bonds, a BBB rating is at the top of the ‘junk bond’ world, while simultaneously at the bottom of the institutional rated debt. Let’s peer deeper into our new BBB Law of the Land as approved in Congress and signed into law yesterday by the Administration. According to the most recent summary from Fortune magazine:
- Tax cuts and business incentives
- Extends and expands the 2017 Trump tax cuts, making most provisions permanent, including lower rates for individuals and businesses.
- $4.5 trillion in total tax reductions over a decade, with new breaks for income from tips, overtime, and auto loans.
- SALT deduction cap raised from $10,000 to $40,000 for five years, benefiting taxpayers in high-tax states.
- Child tax credit increases from $2,000 to $2,200 per child, though low-income families may not get the full benefit.
- Immediate expensing for business equipment and research is made permanent, benefiting capital-intensive industries.
- Middle-income households would see tax cuts of $500–$1,500 per year.
- Seniors –65+ receive an additional $6,000 tax exemption, phased out for higher income seniors
2. Cuts to social safety net programs
- Medicaid and food stamps face significant funding reductions.
- Medicaid work requirements: Able-bodied adults 19–64 in Medicaid expansion states must work, volunteer, or study 80 hours/month; parents of children 14+ included.
- Eligibility for federal benefits is narrowed for noncitizens, with new restrictions and application fees for programs like asylum, work permits, and humanitarian parole.
- Clean energy tax credits and subsidies are rolled back or eliminated.
3. Border security and defense spending
- $350 billion allocated for border and national security, including:
- $46 billion for the U.S.-Mexico border wall.
- $45 billion for 100,000 migrant detention beds.
- Funding for the largest deportation campaign in U.S. history.
- Hiring 10,000 new Immigration and Customs Enforcement agents.
Business owners may have greater flexibility to define taxable income, as may seniors and high-income families.
Those receiving social benefits other than Social Security will have to qualify for such benefits.
Retirement contributions will be changed (subject to IRS regs to come).
We shall follow up this bulletin with more details as they emerge.
Eat wisely
Sleep well
Love with Abandon!