My Statements Look So Good, BUT Will My Taxes Go Up?

First Quarter 2021

My inspiration for this quarter’s letter comes from one of my clients. Out of the blue last month, she called just to say how happy she was to be seeing such big gains when she opened her statements. And then this month she called worried about higher taxes. Suddenly she didn’t feel so good about being “wealthy”. Could I help her figure it all out?

First, some reasons why those statements looked so good when the news was so bad:

• During the pandemic, you did your part by saving more & spending less.

• W&A investment portfolios were diversified to take advantage of changing trends.

• And trends did change – in the stock market, there have been shifts from large-cap to small-cap, U.S. to international, and growth to value.

• We advised that you should have enough cash to weather downturns without selling.

• And yes, this time was different! The government was quicker to react with fiscal stimulus & lower interest rates compared to the 2008-09 downturn. (Source: crfb.org)

Now, let’s tackle that question about higher taxes. As I write this letter in early April, the answer to the question “Will my taxes go up?” is that “It all depends…” Based on current tax proposals, answers would be different based on these questions:

• Is your taxable income less than $400,000?

• Or is it between $400,000 to $1 million?

• Or if your income is over $l million, or your net worth is $50 million or more, there might be a different answer.

• And if you or your portfolio is subject to U.S. corporate taxes, the current top rate of 21% might increase to 28%. From 1995 to 2017 it was 35%. (Source: Internal Revenue Service).

My colleague & fellow W&A strategist Perry Green did an excellent webinar recently on “Where Do I Fit In? Tax Planning for 2021 & Beyond.” You can access a recording of the webinar by clicking here.

Perry ended with an excellent quote from Judge Learned Hand (1934): “Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” All of us at W&A look forward to helping you do just that.

— Phyllis

Author: Senior Vice President Senior Wealth StrategistPhyllis had been associated with W&A for a number of years before joining the firm, acting as a consultant to the company in its formative stage and subsequently as a client. Prior to joining W&A, Phyllis served as Vice President, Corporate Finance at Morgan Keegan & Company, Inc. She was involved in all aspects of its investment banking activities, including mergers and acquisitions, valuation studies, and initial public offerings. She earned registrations in NASD Series 7 (Registered Representative) and Series 63 (Blue Sky). Phyllis holds an MBA in Finance as well as M.Ed and BBA degrees from the University of Memphis. She is a Chartered Financial AnalystTM(CFA®) and a Certified Financial PlannerTM(CFP®) Licensee. She is past-Chairman and past-President of the Mid-South Society of the Financial Planning Association (FPA) and served on their Board of Directors from 1995 to 2000. During her term as President in 1998, the Mid- South Society of FPA was chosen the Outstanding Society of the Year by the national FPA organization. Her community volunteer activities include MIFA and the Women’s Foundation for a Greater Memphis, where she served as Treasurer, Chair of the Finance Committee and currently chairs the Investment Committee. She also serves on the Board of Governors of The Seaside Institute in Seaside, FL.

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