Election Impacts – Tax, Governmental Entities, and Security

  • Financial Management and Disaster Relief
  • 2/9/2021
Businessman Signing Papers

A new administration likely brings new priorities and agenda items. Understand how a new focus could impact government entities.

Key insights

  • Understand if your tax strategy could be affected by proposed policies of the new administration.
  • State and local governments may continue to struggle to execute new programs, due to a reduced workforce, increasing costs, and decreasing revenues.
  • Cybersecurity has been identified as a priority for the Biden administration, likely supported by the legislature.
  • With nearly one-third of inspector general positions unfilled, fraud is a concern for many entities, especially those dealing directly with COVID-19 relief.

Understand how a new administration could impact you.

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While the extent of future changes under a new administration remains uncertain, a shift in priorities, policy ideologies, and management agenda items is fairly certain. Having some insight as to how these shifts could affect you and your organization allows for the preparation necessary to successfully navigate the unchartered waters that lays ahead. Although any level of uncertainty can be daunting, especially during what seems like times of constant change, you do not need to navigate these challenges alone.

Adding complexity, we face rising federal deficits and debt levels, a significant public health crisis, the intricacies of large stimulus packages, and increasing cybercrime alerts.

Below are a few items to consider as you make plans for your entity’s future.

Potential upcoming tax considerations

President Biden and Congressional leadership have proposed various tax increases. However, whether, how, and when it could affect you is yet to be seen.

For example, tax rate increases have been proposed for:

  • Individuals making more than $400,000: from 37% to the pre-TCJA level of 39.6%
  • Capital gains (for taxpayers with income more than $1 million): from 20% to 39.6%
  • Corporate income tax rates: from 21% to 28%

However, a push to overhaul the tax code seems unlikely in the first quarter of the year, as the administration remains focused on battling the pandemic. Regardless, make plans now to prepare for what may lie ahead. Accordingly, you’ll want a flexible and effective tax plan which establishes a clear and customized direction toward your financial goals.

State and local governments

Many state and local governments — already facing pandemic-related revenue shortfalls — are likely to be tapped by the Biden Administration to execute many of its agenda items. While this may bring much needed funds to the states, new requirements and adjustments are necessary for the states to be able to effectively implement the administration’s new programs. The challenge for states to mobilize their operations to ready themselves for new programs have been exacerbated by many states’ reduction of their workforce due to increasing costs and plunging revenues brought upon by the pandemic.

The most recent $900 billion year-end appropriations bill also impacts state and local governments. Although this latest round of stimulus does not include direct funding to state governments, it does include funding aimed at state and local transportation, education, and pandemic response, targeting such items as transit funding, vaccine distribution, community development block grants, and funds for transportation departments.

Cybersecurity and federal entities

Cybersecurity risks are a key concern for all organizations and will likely remain so for the foreseeable future. Shortly after the exploit made by hackers to the Orion software developed by the SolarWinds Corporation, the Biden Administration named cybersecurity as a top priority. The administration’s focus on cybersecurity was made apparent prior to this hack being made public, as the administration nominated and appointed several key cabinet positions within departments, such as:

  • Department of Homeland Security
  • Office of National Intelligence
  • Department of State
  • National Security Advisor

All appointed individuals have worked in prior administrations where their respective offices had developed a robust public-private partnership around cybersecurity that remains in place today.

Furthering the new administration’s commitment to strengthen the nation’s networks against future threats is the approximately $9 billion announced in the recently announced American Rescue Plan. The plan includes investments in the modernization and securement of federal information technology with shared services across the Cybersecurity and Information Security Agency and the General Services Administration. The plan also includes investments to improve security monitoring and incident response activities to bolster cybersecurity across federal civilian networks, as well as to support shared security and cloud computing services. Based on recent action by Congress, it appears the Biden Administration will be supported by the legislature — the recently enacted National Defense Authorization Act included multiple provisions about and funding for cybersecurity, infrastructure security, and security risk management.

Undoubtedly, a secure network is top of mind across all organizations. As was learned when the SolarWinds breach compromised local, state, and federal agencies, as well as businesses across the country, threats to cybersecurity are possible for any organization type.

COVID-19 economic relief and the absence of inspectors general

Successful oversight of government operations is critical to effectively spend the largest stimulus package in the nation’s history. As the Biden Administration takes over the reins of the executive branch, nearly one third of presidentially-appointed inspectors general positions are vacant. This presents challenges not only in the filling of the vacancies, but in the increased risk of fraud, waste, and abuse with these government watchdog leadership positions left unfilled. This risk is especially troubling where those vacancies exist within agencies directly involved with the pandemic response, such as the Department of Health and Human Services and the Treasury Department.

While the CARES Act provides for five levels of oversight, including a Pandemic Response Accountability Committee, filling the inspectors general vacancies will likely be a priority for the incoming administration. To assist incoming administrations and transition teams about the role of federal inspectors general, the Council of the Inspectors General on Integrity and Efficiency publishes a Presidential Transition Handbook. This handbook provides information to the transition team and others within the new administration on topics such as the role of the inspectors general and transition issues relating to inspectors general. It also provides insightful information to agency management regarding the work and processes of inspectors general, to assist agency leadership during their strategic decision-making process within their respective organizations.

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