Returning Value Blog

Inflation vs. Inflationary Pressure

Concerns about the elevated inflationary environment continue to persist. There are numerous contributing factors, such as a rapid increase in wages, energy prices, and an imbalanced global supply chain with demand vs. supply for many goods and services far from equilibrium. To better understand these factors, it is essential to first distinguish inflation from inflationary pressure. Inflation is typified by a sustained increase in the general price levels in an economy, while inflationary pressure is described as either a leading indicator of actual inflation or temporary pricing increases due to isolated or short-term events.

As the U.S. entered 2021, many assumed that newly elected President Joe Biden, along with Democratic majorities in the House and Senate, would swiftly enact tax increases on both corporations and individuals to pay for the cost of proposed new infrastructure and social spending plans, potentially using the budget reconciliation process to do so. Since then, various versions of tax and spending measures have been negotiated and debated by members of Congress and the White House. As 2021 heads to a close, tax increases are still expected, but the timing and content of final changes are still not certain. 

A version of H.R. 5376 (the Build Back Better Act), released on October 28, 2021, by the House Budget Committee, eliminates many of the previously proposed tax increases that would have impacted individuals.

The Social Security Administration recently announced that the wage base for computing Social Security tax will increase to $147,000 for 2022 (up from $142,800 for 2021). Wages and self-employment income above this threshold aren’t subject to Social Security tax.

On September 13, 2021, the House Ways and Means Committee released draft legislation that proposes a series of tax increases and tax cuts, which will undergo a round of markups by the committee over the next few days. Most tax proposals were anticipated; however, the House provided a few surprises. 

• Infrastructure plan is an opportunity for the industry to improve its reputation
• Construction firms are entering into joint ventures to bid on large projects
• Data analytics can identify labor overages: case study

President Biden’s infrastructure plan is set to improve failing infrastructure, rebuild the economy and create new jobs. As of this writing, the plan, which Biden originally released on March 31 as a $2 trillion capital injection over 10 years, is a $579 billion proposal that has bipartisan agreement, though Democrats have signaled the bill may only move through Congress in tandem with a larger spending and tax increase package, which they may try to pass via the reconciliation process.

Despite the COVID-19 pandemic, government officials see a significant increase in the number of new businesses being launched. From June 2020 through June 2021, the U.S. Census Bureau reports that business applications are up 18.6%. The Bureau measures this by the number of businesses applying for an Employer Identification Number.

The State of Alabama will be participating in the 16th annual Back-to-School Sales Tax Holiday weekend for school-related items.  This special shopping period will start at 12:01 a.m. on Friday, July 16, 2021, and end at midnight on Sunday, July 18, 2021. 

Alabama Governor Kay Ivey on May 14, 2021signed House Bill 588 into law, amending the Electing Pass-Through Entity Tax Act ("Act 2021-1") enacted on February 12, 2021. The new law changes the taxable income reporting requirements for pass-through entity (PTE) members and authorizes the Alabama Department of Revenue to waive interest and penalties for underpayments of first-quarter estimated taxes as a result of the bill's retroactive effective date. (For prior coverage of the original version of Act 2021-1, (see Machen McChesney's blog).

On April 28, 2021, the Biden administration unveiled a $1.8 trillion plan to provide assistance to middle- and low-income families that would be largely funded by tax increases on wealthy Americans. The plan is expected to be fleshed out during President Biden’s first address to a joint session of Congress.