What U.S. Midterm Results Could Mean for Your Finances

Voting in the midterm elections opens today, Tuesday, November 8, and the state of the economy and the rising the cost of living are high on the list of voters' concerns.

Millions of Americans across the country will be turning out to make sure their voices are heard, as their votes help determine the balance of power in Congress and set the tone for President Joe Biden's next two years in the White House.

Voters have been considering significant issues ranging from immigration, gun control, abortion and crime, but some of the biggest talking points are rampant inflation, gas prices and rising interest rates.

The vast majority of U.S. adults — 82 percent — rated inflation as extremely or very important for the government to address, according to a recent poll by Monmouth University.

"The midterm elections will be important in terms of defining which party is or isn't in the political driver's seat in Congress over the next two years," Mark Hamrick, a Bankrate senior economic analyst, said in a recent report.

"If a recession does emerge as many fear and expect, it will again fall to elected officials to prescribe and vote on possible legislative responses. In turn, many of these factors may have impacts going into the next general/presidential election."

But, the results of the 2022 midterms could affect your finances in more ways than you might expect if the Republicans win a majority of the seats in Congress.

Following the November midterms, Congress will need to come to an agreement on its plan for fiscal year spending for 2023, which could create an opportunity for a potential year-end tax package that will impact wider spending.

Following the passing of the Inflation Reduction Act last August by the Democratic-controlled Congress, it's expected that a Republican majority in the House of Representatives or the Senate would aim to restrict the spending power of the president and any future financial initiatives he puts forward.

The Democrats have been pushing for another year of Child Tax Credits after Congress didn't pass tax extenders last year.

The expanded child tax credit was enacted with the American Rescue Plan Act, which allowed eligible families to receive advanced payments of up to either $250 or $300 a month (per qualifying child), for six months.

While the Democrats and various advocacy organizations have pushed to reinstate the credit, the Democrats would need to keep control of the House and pick up a seat or two on the Senate to have the votes to reinstate the child tax credit.

However, if the Republicans gain a majority, or if the house remains evenly divided, the democrats will need to rely on a few unlikely Republican votes to pass the bill.

In order to see the bill passed, it's looking as though the Democrats will present a bipartisan deal with the Republicans to support the parties' push for R&D tax credits to aid businesses in innovation, if Republicans agree to reinstate the expanded child tax credit.

If the Republican party gains a majority of seats in the House or Senate, it's likely the Democrats will see major pushbacks on any government spending initiatives.

GOP House Minority Leader Kevin McCarthy, who would become House speaker if elected, released a "Commitment to America" agenda in September aiming to "curb wasteful government spending" if the Republicans won more seats.

Trump Tax Cuts

The Republican party has proposed legislation to make the so-called Trump tax cuts permanent after the individual tax cuts were enacted with the Tax Cuts and Jobs Act of 2017 and were set to expire after 2025.

However, President Biden would still have veto power over this legislation and a Congressional override would be highly unlikely with the Democrats remaining in power over the next two years.

While each midterm vote impacts federal tax policies, there are also individual tax initiatives on the ballot in several states, with voters in 14 states able to voice their opinions on a wide variety of proposed tax law changes.

Residents in California are being asked to consider whether wealthy residents should pay more tax, with Colorado voters set to cast their votes on whether the proposed income tax cuts should come with a limit on tax deductions for the wealthy residents in the state.

Similar proposals for high earners are also on the ballot in Massachusetts after the IRS reported an increase in the tax gap, which has seen a surplus on revenue being returned to residents in the form of stimulus checks.

Boost to Retirement Plans

No matter who wins, it seems as though millions of Americans' retirement plans could be boosted following the midterms.

Republican Senate Finance Committee Chair, Senator Ron Wyden, and Republican Senator Mike Crapo, introduced the bipartisan EARN Act, which has been designed to aid small businesses adopt retirement plans and make them more accessible for part-time workers.

The bill is also expected to expand the saver's credit for low to middle-income workers, as well as allow penalty-free pension withdrawals for emergencies, which is something the Democrats are expected to support.