No one knows for sure what 2022 will bring in the form of tax legislation, but there is certain to be some action. Top tax analysts think there are several topics that are likely to come up in 2022. Most predict that a lot of potential changes that were discussed but never made much traction in 2021 will be revisited.
Rolling Back Corporate Tax Rates
Back in 2017, then-President Trump’s Tax Cuts and Jobs Acts (TCJA) reduced corporate tax rates. While a bid raise them again failed in 2021, many believe there is a good chance that Democrats will try again in 2022. Most believe a 2022 proposal would try to raise the current 21 percent corporate tax bracket up to between 25 percent and 28 percent, but opinions vary. While most analysts see a push to raise rates, no one predicts a push to go back to pre-2017 rates, which were as high as 35 percent. Republican opposition to any such measure is expected to be strong.
The Billionaire Tax
New spending proposals in 2021 saw the backing of a billionaire tax as a method to help finance them. While no such tax made its way into law during 2021, many analysts believe that a billionaire tax is likely to resurface once again in 2022.
The name is a bit of a misnomer, as the most recent proposals applied to more than just billionaires; they were set to impact taxpayers with more than $1 billion in assets as well as those with over $100 million of income for three years in a row. Under these thresholds, the tax would only impact approximately 700 to 800 people in the United States.
Proposals from 2021 included a controversial provision that is a major deviation from current tax law: taxing unrealized gains. Currently, with few exceptions for professional traders who can elect to mark-to-market for example, tradable assets such as stocks are taxed only on realized gains once the asset is sold. Iterations of the billionaire tax proposed to change this and require such assets to be valued annually and taxed according to the unrealized portion as well. The rationale is that the ultra-wealthy can take loans against their assets and avoid ever selling or realizing the gains – and therefore avoid taxes as well.
Finally, it’s important to note that this particular form of billionaire tax is not the same as a wealth tax. This tax focuses on unrealized gains only and not the taxpayer’s total wealth.
A True Wealth Tax
Another tax law that made its way into the national spotlight during 2021 and is likely to get another try in 2022 is some form of a wealth tax.
Typically, a wealth tax is a flat tax percentage placed on a taxpayer’s total net worth annually; say one percent, for example. Unlike essentially all forms of taxation in the United States, a wealth tax would see someone owing money year-after-year even if they never made any more money.
One of the biggest non-political problems with a wealth tax is logistics. Taxing net worth means that every asset a taxpayer owns needs to be valued annually, including real estate, cash, investments, business ownership and other assets. This creates a huge administrative burden and leaves a lot of room for interpretation between valuation professionals as well.
No analyst foresees any wealth tax proposals applying broadly. Instead, most see it being targeted at the ultra-wealthy – those with a net worth over $50 million. This makes it politically palatable as the vast majority of taxpayers are exempt; however, there are many who oppose any such tax either due to ideological reasons or because they feel it represents a slippery slope to eventually capture more and more taxpayers with lower net worth thresholds.
Tougher Regulations on Cryptocurrency
One of the most unclear areas for potential 2022 tax law proposals involve cryptocurrencies. The reality is that most of Congress simply doesn’t understand the market and the IRS itself is mired in technical rules on how to treat various sectors of the emerging financial arena.
While some analysts predict there will be proposals to differentiate the tax treatment from more traditional assets, others believe the moves will be largely regulatory and focus on compliance and minimizing tax avoidance within the asset class.
Many of the above tax provisions are highly partisan in nature. As a result, it is likely that congressional gridlock will ensue and little if anything will get passed through legislative channels. This leaves many analysts predicting that tax changes, to the extent possible under our system, may see more executive actions than usual. Regardless, with the current economic uncertainty, high inflation and geopolitical instability, the topics above may or may not come up this year. One thing is certain however, taxes won’t be going away or getting any simpler.
Yearly performance evaluations just might be heading out the door, according to a recent WorkHuman Analytics & Research Institute Survey. Findings reveal that these appraisals are less than effective and used less often. Based on select findings, 55 percent of employees responded that yearly evaluations don’t help them become better in their role. Almost as many, 53 percent, indicated that annual reviews recognize an employee’s complete workload. The survey also found that only 54 percent of businesses used annual reviews in 2019, compared to 82 percent of workers saying their employer used annual reviews in 2016.
According to Gallup, only 14 percent of workers responded positively that performance reviews motivated them to get better at their skill set. It also found that among businesses with 10,000 workers, time taken for performance evaluations reduced employee productivity by at least $2.4 million and up to $35 million. It also found that one-third of workers’ output and quality declined.
When it comes to traditional performance reviews, many employees believe they are run by managers with little regard to any employee input whatsoever. However, there are other ways to evaluate an employee: the worker can evaluate themselves; their co-workers can appraise them; or a combination of a self-, peer- and manager-focused assessment.
As Harvard Business Review explains, since traditional performance reviews are mutually stressful for managers and their subordinates, there are a few recommendations to attempt to make it a more productive experience.
The first recommendation is to set initial, mutual expectations for manager and employee. When the year begins, the business’ performance requirements should be detailed for the employee so that expectations are clear. By setting performance objectives with the employee, the manager and business will ensure that employees are answerable for their performance.
The second step is to prepare for the in-person evaluation as it gets closer to the meeting. Two weeks before the in-person evaluation, HBR recommends that workers and managers review their past accomplishments – good, bad, etc. Managers could also ask for objective co-workers’ assessments of the employee’s work to garner different perspectives on their performance.
Before a face-to-face meeting, give the employee the assessment to let them internalize it and let their emotions settle before the discussion. From there, the atmosphere should be established by the manager. When it comes to competent, high performers, managers should keep the reviews on the workers’ accomplishments and progression at the company, along with concerns they might have in their role. For poor performers, putting the focus on accountability and improved results is the recommended route.
Asking employees what’s working and what’s not working can be helpful for both manager and employee. It’s also recommended to point out what specific actions, not generalities, employees should take to keep improving.
Based on the evolution of how and where work is being conducted, it seems that the annual performance review needs to be re-evaluated and updated. Only time will tell how it will change, but based on what’s not working, it will evolve as the workplace moves deeper into the 21st century.
According to the World Bank, there’s a mixed picture for commodities in 2022.
Globally, prices for crude oil are expected to hit $74 per barrel during 2022, compared to 2021’s $70 price tag. This is attributed to greater economic activity as the world continues its reopening. Metal commodities, on the other hand, are projected to drop in 2022 by 5 percent. Similarly, the “softs,” or farming-based commodities, are expected to find an equilibrium or fall nominally in 2022. With much uncertainty related to the pricing of commodities and their impact on 2022’s markets, how have commodity prices impacted company profits and past market cycles?
Earnings, Profits and Measuring Margins
When it comes to evaluating margins, we examine how profitable sales have been after factoring in external and internal costs. Be it at the net margin level, the gross margin level, or the operating margin level, businesses get a wide analysis of their profitability.
There are many reasons companies could see margin pressure, and therefore reduced profitability. Competition, internal production challenges (e.g., rising overhead caused by increases in wages, raw materials, electricity, etc.), so-called “black swan” events such as pandemics, and other geopolitical events impacting commodities and tariffs are among the many reasons for margin pressure.
The World Bank, focusing on the outlook for oil, sees a potential for domestic shale production to pick up less quickly, and the favoring of crude oil versus natural gas. Higher energy prices could slow growth, and the uncertainty of the pandemic could affect energy demand. However, based on reduced investments in crude oil, recovery has fallen since 2014, and again in 2020. Many initially think of the price they pay at the pump. However, indirect costs of increasing crude oil impacts shippers, retailers, airlines, fertilizer manufacturers and farmers, the transportation industry – and the stock prices of those publicly traded companies.
As for other commodities, there are considerations for direct and indirect industry performance. For example, the price of lumber can immediately impact how much homebuilders charge for a new home; however, it also impacts the real estate market, additions, and other industries that use large quantities of wood.
Analyzing Stock Market Sector Performance
When it comes to looking at commodity prices, consumer behavior, and market cycles for the past six decades (starting in 1962), consumer staples have been a steady winner. Looking 10 years back from mid-April 2021, based on Indices, consumer sector stocks grew by 8.2 percent, versus the S&P 500’s annualized returns of 11.86 percent over the same timeframe.
The consumer staples sector is one industry where high commodity prices are likely to impact earnings less than consumer discretionary. With consumer staples a necessity that is independent of the health of the economy, the level of demand is stronger than other sectors. While consumer staples aren’t immune from competition, they are often easier for companies to push price increases through.
In 2022, many Central Banks globally are expected to push a more hawkish monetary policy. Only time will tell whether or not global monetary actions will get a handle on commodity prices and influence markets accordingly.
If you pay $250 a month for cable and premium channels, that’s $3,000 a year. Over a 30-year period, the total cost would be $90,000. We don’t tend to think about how much we pay in regular expenses over the long term.
However, that’s how various industry analysts report the cost of healthcare during retirement. Recent estimates for a retiring 65-year-old couple fall between $300,000 and $400,000 to cover healthcare expenses in retirement. At first glance, that’s an intimidating number and implies that pre-retirees need to have this much saved by the time they retire.
Fortunately, when you break down the numbers, that’s not the case. First of all, that estimate includes premiums for Medicare with prescription drug coverage, which are typically deducted from Social Security benefits before they ever hit your bank account. According to T. Rowe Price, Medicare premiums account for 76 percent to 82 percent of most retiree’s healthcare expenses, so a large portion of these costs are paid for outside of your household budget.
The true cost of retiree healthcare expenditures is based on how healthy you remain during retirement. And actually, that’s not necessarily related to savings – it’s more a combination of genetics and peoples’ penchant for healthy living before and during retirement. However, it’s always best to prepare for the worst, so the more money you save and earmark for healthcare expenses, the better off you’ll be.
One way to control your monthly premiums in retirement is to shop and compare Medicare plans each year during open enrollment. It helps to keep a running tab of your out-of-pocket expenses each year so that you can increase your Medicare coverage if your costs start trending higher. Higher coverage might mean higher premiums, but that will lower out-of-pocket costs each year.
The following guide was developed by T. Rowe Price. It estimates how much retirees spend based on different types of Medicare plans using 2021 premiums and data from the Health and Retirement Study (HRS). Among retirees who enroll in either (1) Medicare Parts A, B and D; (2) Medicare Advantage HMO and Drug Plan; or (3) Medicare Parts A, B, D and Medigap:
- 25 percent will pay less than $500/year in out-of-pocket expenses
- 50 percent will pay less than $1,200/year in out-of-pocket expenses
- 25 percent will pay more than $1,900/year in out-of-pocket expenses
- 25 percent will pay more than $3,900/year in out-of-pocket expenses
As for paying those out-of-pocket expenses, remember that you pay them over time, so it’s not as if you’re paying a large lump sum all at once. One strategy is to fund a savings account with enough money to pay out-of-pocket expenses for the year, based on your prior year’s spending. Then replenish this account each year from other funding sources, such as an annual required minimum distribution (RMD) from a retirement account.
If you have access through your current health plan, pre-retirees can save for healthcare expenses with a health savings account (HSA). Contributions are tax deductible and, over time, you can invest your savings for earnings accumulation. These funds, including investment gains, are never taxed as long as they are used to pay eligible healthcare expenses. The account is particularly useful if you don’t tap it until retirement, when the money can be used to pay for things like dental and vision care, hearing aids, long term care insurance premiums and nursing home costs.
Despite those alarming projections about how much healthcare will cost you in retirement, remember that it can be manageable because it is paid out over time.
According to statistics from the Society for Human Resource Management (SHRM), employer-budgeted healthcare costs increased to an average of $12,792 per employee in 2021. Employees can help keep employer healthcare costs – and their premiums – down by planning ahead and negotiating fees for service.
Call Before Your Treatment
When you’re busy, sending an email might expedite your request. However, it’s best to stop, take a little time to pick up the phone and talk to a real person. Ask for the hospital’s billing department and get an estimate of how much your procedure might cost. (Write down the name of the person you speak with, plus the day and time.) Send this to your insurance provider to find out what your plan will cover. Then contact the hospital and let them know how much you can afford. When you’re recovering, you’ll have less worry about how to pay.
Offer to Pay in Full Up-Front
If you have the resources to do this, go for it. Consumer Reports estimate that you could save 20 percent off your bill. Ask to speak to someone who has the authority to grant you this deal and again, jot down the details of your call. However, if the treatment is more than you can afford, you might consider medical debt consolidation.
Shop Around for Less Expensive Providers
Insurance companies usually offer cost estimates for treatments. Some companies like UnitedHealthcare and Blue Cross Blue Shield even have cost comparison tools. If your insurance provider doesn’t offer this, try third-party sites like Healthcare Bluebook and GoodRx to shop and compare. Remember that though important, cost should never be the top consideration when deciding on a facility for your healthcare.
Understand What Your Insurance Covers
And what it doesn’t. Ask for a Summary of Benefits and Coverage from your provider to find out exactly what’s what when it comes to coinsurance, deductibles and more. Being prepared is always a good idea.
Ask for an Itemized Bill
After your treatment, you’ll receive an Explanation of Benefits (EOB) from your insurance company. This isn’t a bill and might be updated while your claim is being processed. But the first thing to do when you receive these are to check them for errors – humans make them!
Make Sure Services are In-Network
Before your procedure, check to see that all your labs, anesthesiologists and other services are in-network. Some states prohibit out-of-network providers from charging out-of-network prices when performing care at an in-network setting. Learn about your state’s level of protection at The Commonwealth Fund.
Seek Assistance Programs
Ask your healthcare provider – the hospital or lab’s billing department – about financial assistance and/or charity programs. Thankfully, hospitals have a standard procedure for helping those who are unable to pay their bills. Some hospitals even have discounts for people who don’t have access to medical insurance. You might also ask your provider about medical debt forgiveness. If this is an option, you’ll be asked to share tax returns and other relevant documents. Other resources to help you navigate your healthcare expenses are the Patient Advocate Foundation or the PAN Foundation.
Get on a Payment Plan
Generally, healthcare providers offer no-interest payments and are available to anyone who needs it. Better still, you won’t have to meet eligibility requirements like you would with payment assistance programs. But when setting something like this up, make sure you agree to a plan that you can stick with. Otherwise, your bill might be turned over to a collection agency.
As you know, your health is your most precious asset. Make sure you’re fiscally prepared to care for it.
Medical Debt Consolidation: Using a Loan to Pay Medical Bills (lendingtree.com)
State Balance-Billing Protections | Commonwealth Fund