Obama And Your Pocketbook

In case you haven’t heard the news, Democrat Barack Obama won the presidency last night. Democrats also picked up several seats in the House of Representatives and the Senate. For those interested in personal finance, this outcome may raise questions. Specifically, you may be wondering: how will an Obama presidency impact your pocketbook?

Two things:

1) Energy Policy and Costs: Obama supports a cap and trade system on coal emissions as well as movement towards alternative energy. This suggests that companies producing or using coal or other fossil fuels will be at a regulatory disadvantage for the next few years. So, if you’ve got investments in these energy sources you might consider diversifying into solar or wind energy firms. Keep an eye on headlines for these industries and do your due diligence.

2) Tax Increases: The president elects statements have been consistent regarding the need to increase taxes on high net worth individuals and corporations (1). There has also been talk of increasing the marginal tax rate on capital gains and dividends, raising them from their current rate of 15% to 28% (1). So, what this suggests is that an Obama administration will increase taxes, especially on mechanisms used by high net worth individuals.

However, it may be too early to tell how your wallet will be effected. Many of Obama’s staff appointments have not finalized and there isn’t any legislation yet proposed. Given the contentious nature of the policy processes, it’s also possible your personal finance may not be impacted at all by the change in administrations.