This week I\u2019ve had the pleasure (insert sarcasm) of reading H.R. 5376 also known as the Inflation Reduction Act of 2022. Candidly, I did get bored a few times and sped through some of the repetitious sections. The big questions are these:<\/p>\n\n\n\n

1. Will this reduce inflation?<\/li>
2. Will this increase taxes?<\/li>
3. Will this lower medical costs?<\/li><\/ol>\n\n\n\n

   Simply, the answer is no, probably, and yes and no. You\u2019ve got to love ambiguity. Below is a quick response to these questions. For a more comprehensive answer see my article in (fill in):<\/p>\n\n\n\n

   First, will this reduce inflation. No. You can\u2019t fight inflation by spending more money.<\/p>\n\n\n\n

   The inflation reduction measures in this bill are mostly tax credits for “clean” purchases or incentives for “clean” energy creation. In other words, subsidies. The problem with this is that “clean” energy isn\u2019t cheaper, isn\u2019t forecasted to be cheaper than current sources, and tax credits do lead to short-term price decreases, but they also lead to long-term price increases.<\/p>\n\n\n\n

   Can we kill inflation with more spending? Again, no. Let\u2019s relate this in a way we all can understand. If you\u2019re teenage child kept missing their 12am curfew by 10-15 minutes, then would you change their curfew to 12:30am to increase compliance? No\u2026we all know this would lead to 12:40-12:45am return home times. Again, you can\u2019t fight inflation with more spending, just like you can\u2019t fight tardy teenager return times by giving them more time.<\/p>\n\n\n\n

   When asked, even Senator Sander\u2019s said this “will have a minimal impact on inflation.” Remember politicians tend to inflate the positives. Translation, this will not lower inflation.<\/p>\n\n\n\n

   Second, with this increase taxes? Probably.<\/p>\n\n\n\n

   President Biden has promised, and the media has overwhelmingly accepted as fact, the notion this won\u2019t increase taxes on anyone making less than $400,000. However, unlike most people, I actually read the bill. It doesn\u2019t say this. Here\u2019s what it actually says (page 43):<\/p>\n\n\n\n

   “Nothing in this section is\u00a0INTENDED<\/em><\/strong>\u00a0on any taxpayer or small business with a taxable income below $400,000. Further, nothing in this section is intended to increase taxes on any taxpayer not in the top 1 percent.” (emphasis added)<\/p>\n\n\n\n

   In other words, they don\u2019t intend to raise your taxes, but it might happen. So, who will the newly minted 87,000 IRS agents target? You shouldn\u2019t assume it will be the wealthy.<\/p>\n\n\n\n

   In 2020, Janet Holzblatt, with the Tax Policy Center stated audits on higher taxpayers “yield more revenue per audit,” but have a “smaller return on investment,” in comparison to simpler returns since audits on high taxpayers “take longer and are conducted by more specialized, higher-paid revenue agents.”<\/p>\n\n\n\n

   Sunita Lough, the IRS Deputy Commissioner for Services and Enforcement says as much. On the IRS\u2019 website she states, audits on higher-income taxpayers “routinely take years to resolve,” and are handled by the highest “trained and experienced IRS agents.” By definition, newly hired IRS agents will not be the most experienced agents. Who will they be deployed on?<\/p>\n\n\n\n

   In my opinion, they\u2019ll go after the small business owners.\u00a0\u00a0Anyone claiming the vehicle, travel, meal, depreciation, or use of home office deductions should take warning. Auditing these returns will align well with the skillset of the IRS\u2019 soon to be built enforcement army.<\/p>\n\n\n\n

   One more point, when looking at IRS data, taxpayers earning between $100,000 and $200,000 are audited 95% less than the highest earners. Hmm\u2026 who will the IRS audit more\u2026 you decide.
   Third, will this lower medical costs. Yes and no.<\/p>\n\n\n\n

   If you\u2019re on Medicare, then yes, but not by as much as you\u2019d hope. For Medicare and Medicaid recipients:<\/p>\n\n\n\n

   1. Prices for some drugs will be determined and capped (insulin at $35).<\/li>
   2. This will ONLY apply to 10 drugs starting in 2026 and 20 by 2029.<\/li>
   3. Annual out of pocket costs will be capped to $2,000 per person.<\/li><\/ol>\n\n\n\n

      If you\u2019re not on Medicare or Medicaid, then the answer is no. I suspect, like in the past, the drug manufacturers and healthcare providers will make up the lost profits by charging non-Medicare and Medicaid recipients more.<\/p>\n\n\n\n

      Interestingly, in the long run, this could be a strategy to make Medicare for all more attractive, but that\u2019s a story for a different day.<\/p>\n\n\n\n

      In short, this isn\u2019t likely to help with the inflated costs we\u2019re all feeling. Business owners and anyone not taking a standard deduction should be very careful. On the positive side, we\u2019ve helped prepare you for this event. This is why we review every client\u2019s tax returns when they become a client and request a copy during each annual review. We\u2019ve identified 100s of error, red flags, and discrepancies that increase audit risks.<\/p>\n\n\n\n

      We\u2019ve built your retirement plan to handle inflation, unexpected risks, and taxes. Unfortunately, this standard isn\u2019t met with most financial firms, and that\u2019s why so many retirees or soon to be are worried.<\/p>\n\n\n\n

      Yours Truly,<\/p>\n\n\n\n

      Michael Jay Markey, Jr.<\/p>\n\n\n\n

      Hopefully this message alleviated any concerns you had about these uncertain times. If not, please feel free to schedule a call with myself or Dale.<\/p>\n\n\n\n

      ---

      \n\n\n\n

      <\/p>\n\n\n\n

      Michael Jay Markey Jr., MRFC, BFA<\/strong>
      Financial Speaker, Author, and Show Host
      Investment Advisor Representative & Insurance Representative
      MDRT Top of the Table Member<\/p>\n\n\n\n

      RADIO: Fireproof Your Finances<\/strong>
      Heard Weekly on 102.9FM, 97.5FM, 98.7FM, 1034 AM, and 1570AM
      Click here for past episodes<\/a><\/p>\n\n\n\n

      AUTHOR: Fireproof Your Retirement, 2014,; and \u201cSeriously Ramsey\u201d The Register<\/strong>
      Click here to read Fireproof Your Retirement online edition<\/a><\/p>\n\n\n\n

      Legacy Financial Network\/LFN Advisors Inc.
      <\/strong>700 Terrace Point Dr., Ste 325
      Muskegon, MI 49440
      PH: 616-589-4004
      FX: 888-900-9135
      www.legacyfinancialnetwork.com<\/p>\n\n\n\n

      Advisory services offered through LFN Advisors, Inc. Insurance services offered through Legacy Financial Network. The aforementioned are affiliated companies.<\/em><\/p>\n\n\n\n

      LFN Advisors, Inc. outgoing and incoming e-mails are electronically archived and subject to review and\/or disclosure to someone other than the recipient. We cannot accept requests for securities transactions or other similar instructions through e-mail. We cannot ensure the security of information e-mailed over the Internet, so you should be careful when transmitting confidential information such as account numbers and security holdings. If the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by replying to this message and deleting it from your computer. Legacy Financial Network, 700 Terrace Point Dr, Suite 4A, Muskegon, MI 49440 United States<\/em><\/p>\n\n\n\n

      
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