What You Should Know About a Possible Government Shutdown

TALK OF AN END-OF-YEAR GOVERNMENT SHUTDOWN sounds scary, especially if you're one of millions of Americans counting on Social Security, Medicare and other services, or you're concerned about the effects on the markets. While the underlying differences keeping Congress from passing a budget for next year are serious, there are several good reasons not to lose sleep over the possibility the government will close its doors.

First,it may not happen. Legislators have until December 22 to avert a shutdown. Even if they don't reach a long-term solution, they'll likely reach at least a temporary agreement, pushing a new deadline into 2018.

Crucial services remain. Even if a shutdown occurs, Social Security, Medicare, and other essential services will continue to be maintained.

Markets recover quickly. We've been through this before. The federal government shut down for 16 days in 2013, 21 days in 1995 (the longest on record) and 10 other times going back to 1981. Analysis by the Chief Investment Office (CIO) tells us that these events cause temporary increases in interest rates but otherwise have little impact on markets or economic growth.

That said, the political brinksmanship behind the threat of a shutdown reveals sharp partisan divisions on funding priorities, even as Congress moves towards a likely vote on sweeping tax reforms before the end of the year. Reaching a long-term budget solution will likely require bipartisan cooperation on issues that are key to many Americans, such as health insurance for children, disaster relief, and immigration policy.

Even if a shutdown occurs, Social Security, Medicare, and other essential services will continue to be maintained.

A Guide to the House and Senate Tax Bills—and What You Can Do Now

AS A TAXPAYER WATCHING THE NEWS LATELY, you may feel caught in a game of hurry up and wait while the House and Senate work out their compromise bill. Like most Americans, you're probably wondering what deductions will be in or out. And what tax rate you might fall under when all is said and done.

The compromise committee set up to work out the details of a unified bill aims to finish its work by December 15 and bring it to the full House for a vote during the week of December 18. The Senate is expected to vote by December 22. If a bill is passed this year—and that is looking increasingly likely--many of its provisions will take effect on January 1.

"Some of the key differences in the two bills involve major areas of your life—including your health, your home and your children's education."

The extent of the changes anticipated—and the lack of time to respond should a bill pass before year end—make year-end tax planning especially difficult. It's always best to plan based on actual law rather than proposals, so there isn't much you can do for 2017. But it's wise to understand the implications that various proposals might have on your tax situation and the rest of your financial life in 2018.

One thing you can do is take some time to familiarize yourself with the two bills currently before the compromise committee. The latest Tax Bulletin from U.S. Trust offers side-by-side comparisons of the House bill, the Senate version, and current tax law, as well as a detailed look at how the proposed changes could affect your life and finances.

Some of the key differences in the two bills involve major areas of your life—including your health (and whether medical deductions will be allowed), your home (and how mortgage interest and property taxes will be treated) and your children's education (and what you can use 529 college savings account funds for).

After you read the Tax Bulletin, you may want to sit down with your tax professional and Private Client Advisor to discuss the implications of proposed changes.

For more insights on how tax reform could affect your life and finances, download Tax Bulletin 2017-7.

How tax reform, budget negotiations and other legislative decisions could affect the markets and your financial life

Inching Closer to a Major Tax Overhaul: What's at Stake?

Over the weekend, Senate Republicans narrowly passed a bill to overhaul the U.S. tax system with a 51-49 vote. The bill differs in significant ways from the tax bill passed by the House of Representatives on November 16.

Notable areas in which they differ include the number of tax brackets and the rates various income groups will pay, the treatment of pass-through entities (businesses whose income is taxed at an individual rather than a corporate rate), estate taxes, mortgage interest deductions, property tax write-off allowances and which parts of tax reform will remain permanent.

What happens next? Both bills will be taken before a conference committee, where both chambers of Congress will work to reconcile the differences and craft a joint bill that they can send to the President for signing. Republicans expect to resolve the differences between the two bills by the end of the year.

With this weekend's Senate vote, the Chief Investment Office (CIO) believes the probability of tax reform has increased substantially. Once it is enacted, there's little doubt that the legislation will have an effect on people's financial lives, with implications for such key questions as how to manage student debt and whether or not to buy or rent a home, among other things.

Notable areas in which the House and Senate bills differ include the number of tax brackets and the rates various income groups will pay, mortgage interest deductions, and property tax write-off allowances.

The market implications, according to the CIO team, may turn out to be positive. In their latest publication, Investment Insights: The Latest on Tax Reform, they explain why they think the core framework of each bill would likely add momentum to the strong profit growth experienced in 2017.

For more insights on the potential impact of tax reform on the markets and the economy and how you, as an investor, can respond, download "The Latest on Tax Reform"



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