How Biden Stepping Down as the Democratic Nominee Could Impact Your Wallet
On July 21, news broke that President Joe Biden would be dropping out of the 2024 presidential race. Biden endorsed Vice President Kamala Harris to replace him. Many voters are wondering which candidate in the 2024 election will be better for their cost of living.
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Vipin Porwal is the CEO and founder of Smarty. A recent Smarty survey revealed that the current state of the economy will dictate who 53% of consumers vote for and that more than 27% of consumers say they’re holding out on large purchases like a home or a car until they know the election results.
“This upcoming election season not only demonstrates how consumer spending will be impacted by who wins the presidency but also the different political approaches between older and younger generations,” Porwal said. “Our research reveals that more than a quarter of Americans are holding off of big ticket spending until they know the election results, with younger adults being even more cautious.”
Now that Biden is no longer in the race, what will happen to the economy? Here’s what experts had to say.
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Potentially Higher Taxes Overall
President Biden had said that, if he were reelected in November, he would propose a “billionaire tax.” This was a bit of a misnomer, as it wasn’t just going to take aim at billionaires — but it would have raised taxes for the wealthiest Americans. Experts say we can expect that a lot of Biden’s economic proposals could still show up with a new Democratic nominee — specifically Harris.
“Since Vice President Kamala Harris has the inside track for the nomination, it’s unlikely the Democratic platform will change that much,” said Dr. Jim Ronan, a lecturer in the department of political science at Villanova University. “Therefore, it would seem a potential Harris budget as president would be similar to the Biden plan, which we can assume would have been modeled on the previous Biden proposals.”
Similarly, David Schultz, professor of political science and legal studies at Hamline University in Minnesota, said the tax hike likely will stay in play.
“There is a big push among many Democrats to push for a wealth tax on those making more than $400,000 per year,” Schultz said.
In addition, Biden’s plans included a 25% tax on Americans with net worths of more than $100 million. If you happen to fall into these income brackets, you could see your taxes go up with another Democrat on the bill.
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Higher Capital Gains Tax
One of the taxes that could specifically rise is the capital gains tax.
“There is pressure to put more funding into the IRS to capture those evading taxes, and there is talk among some to increase the capital gains tax,” Schultz said.
If you’re planning to sell any of your assets that are subject to capital gains taxes and you fall into a higher income bracket, your taxes could more than double — even though Biden isn’t the nominee.
President Biden’s proposed 2025 budget totaled $7.3 trillion. One way he said he would raise funds was by raising the capital gains tax. Currently, the capital gains tax you pay on stock, crypto or property you sold starts at 15% and maxes out at 20%. This is based on income.
Biden’s plan said those making $1 million a year or more could see capital gains taxes between 40% and 45%. A Democratic nominee replacement most likely will continue with some sort of capital gains hike.
Increased Inflation
If you’re planning out your budget for next year, plan on prices going up. The current inflation rate is right around 3%. During Biden’s term, we have seen an inflation rate as high as 9.1%, which was the case in 2022. Is Biden to blame entirely for inflation? Economists at CNBC say that inflation rising can be attributed to fallout from the pandemic and global conflict. Because of the timing, some voters might be quick to blame Biden and Democrats in general for rising prices.
Milton Ezrati, the chief economist at Vested, said prices are likely to go up.
“I think [Biden’s] withdrawal will have no effect,” Ezrati said. “What will have an impact is who replaces him on the ticket.”
California Gov. Gavin Newsom and Michigan Gov. Gretchen Whitmer are two high-profile Democrats some consider options to be the nominee instead of Harris — although neither has expressed that interest at this point.
“The first two are big spenders,” Ezrati said of Harris and Newsom. “The prospect of either in power will create expectations of an acceleration in inflation and, as people position themselves for those expectations, we could see a modest pickup in actual inflation.”
Ezrati said Whitmer is the most moderate of the trio, so there could be less chance of inflation with her on the ballot. Ezrati added that inflation might be inevitable, no matter who is on the ballot.
“On the fiscal side, much depends on the shape of Congress in 2025,” he said, “and that has only marginally to do with Joe’s withdrawal.”
Schultz agreed and said inflation will still be an issue no matter who wins in November.
“Regardless of Trump or someone else,” he said, “increased spending — or spending at the same pace — along with tax cuts will possibly continue to fuel inflation and do nothing to address a growing national debt.”
The House and the Senate Impact
Ronan said it’s important to remember the significance of the House and Senate races.
“Regardless of who wins the White House,” he said, “the partisan breakdown of Congress will play a major role when it comes to passing a budget, and this breakdown looks likely to be narrow majorities for either party in both chambers. So, while presidential candidates can make grandiose promises, the reality is any budget will contain a great deal of compromise.”
Keeping an eye on the candidates in these races and their proposed plans of action could be just as important as who’s in the White House.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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