Markus Andrews

Project 2025, a collection of policy proposals “for an effective conservative administration,” outlines sweeping tax law and IRS changes.
The plan calls for a two-tier tax system, lower capital gains taxes, IRS budget cuts and scrutiny of tax reporting. By contrast, Trump hasn’t outlined detailed tax policy proposals.
Some Project 2025 plans could be enacted via executive action, but many tax policy proposals would require legislation, which could be difficult without Republican control of Congress.

Republican presidential nominee and former U.S. President Donald Trump applauds on Day 2 of the Republican National Convention (RNC), at the Fiserv Forum in Milwaukee, Wisconsin, U.S., July 16, 2024.
Elizabeth Frantz | Reuters

As former President Donald Trump secures the Republican presidential nomination, both political parties are eyeing Project 2025, a multi-pronged policy plan created by conservative think tank The Heritage Foundation as a collective effort with more than 100 other right-leaning organizations.
If enacted, the plan could overhaul the U.S. income tax system and revamp the IRS, among other changes.

More from Personal Finance:Lower capital gains tax, SNAP cuts: What Project 2025 could mean for your walletMany Americans think they’re insulated from climate change. Their finances show otherwise3 money moves to make ahead of the Federal Reserve’s first rate cut in years
The roughly 900-page “Mandate for Leadership” calls for sweeping changes to the federal government and policy recommendations for the next administration. The Heritage Foundation launched the project in 2022 and published the policy collection in April 2023.
President Joe Biden and Democrats have framed the initiative as a preview of a second term from Trump. On a website dedicated to Project 2025, the Biden campaign describes the plan as a “blueprint for Trump.”
Meanwhile, Trump has made statements to distance himself from the mandate.
“I know nothing about Project 2025. I have not seen it, have no idea who is in charge of it, and, unlike our very well received Republican Platform, had nothing to do with it,” Trump wrote on July 11 in a Truth Social post.

However, several former Trump officials have been directly affiliated with Project 2025 and Trump praised the Heritage Foundation in April 2022 in a recently resurfaced video.
“As President Trump said, he has nothing to do with Project 2025,” said Steven Cheung, a spokesman for the Trump campaign. “The only official policy approved by President Trump is the GOP Party Platform found on his website.”
A spokesperson for the Heritage Foundation said the organization was unable to provide a statement. Earlier this month, the group told CNBC: “As we’ve been saying for more than two years now, Project 2025 does not speak for any candidate or campaign. We are a coalition of more than 110 conservative groups advocating policy and personnel recommendations for the next conservative president.”
“But it is ultimately up to that president, who we believe will be President Trump, to decide which recommendations to implement,” the organization said.

Some Project 2025 plans could be enacted via executive action, but many tax policy proposals would require legislation, which could be difficult without Republican control of Congress.
Here’s what the proposed policies could mean for taxes and the IRS.

Reduce the federal tax brackets

Project 2025 aims to “promote prosperity” by reducing marginal tax rates, lowering the cost of capital and broadening the tax base.
The plan departs from the current federal income tax brackets with a “simple two-rate individual tax system” with flat rates of 15% and 30%. The higher tier would start around the Social Security wage base, which is $168,600 for 2024.
For 2024, there are seven brackets with a top rate of 37%. But without action from Congress, some of these rates will increase after 2025 once provisions from the Tax Cuts and Jobs Act, or TCJA, sunset.

Under the Project 2025 proposal, you could pay more or less in federal income taxes, depending on your current bracket, according to Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.
The plan would also eliminate “most deductions, credits and exclusions,” including tax breaks for state and local taxes and education.
However, most Americans don’t claim itemized deductions, Gleckman said. Nearly 90% of filers claimed the standard deduction in 2021, the most recent data available, compared to about 70% in 2017 before the TCJA was enacted, according to IRS data.
The “fundamental reform” outlined in the project could include some type of consumption tax, levied on goods and services, such as a national sales tax, business transfer tax or others.
But these policies could be “quite the battle to get enacted” in Congress, said Garrett Watson, senior policy analyst and modeling manager at the Tax Foundation.  

Prasit Photo | Moment | Getty Images

Lower taxes on investment income

The plan also proposes lower taxes on investments for higher earners with capital gains and qualified dividends levied at 15%. Currently, the top rate for long-term capital gains, or assets owned for more than one year, is 20%.

Plus, Project 2025 would abolish the so-called net investment income tax, or NIIT, an extra 3.8% levy on assets for higher earners. The NIIT kicks in once modified adjusted gross income, or MAGI, exceeds $200,000 for single filers or $250,000 for married couples filing together.
Top earners currently pay a combined 23.8% on capital gains including the NIIT, so the proposed tax breaks could be a “big deal” for higher-income investors, Gleckman said.

Reduced estate and gift taxes

Higher estate and gift tax exemptions enacted via the TCJA are scheduled to sunset after 2025. But the plan calls for making the 2017 TCJA changes permanent and reducing the estate and gift tax rate to a maximum of 20%, down from 40%.
Fewer than 1% of taxpayers were subject to estate tax in 2023, according to Tax Policy Center estimates.
“If you’re one of those people, your heirs would be very happy with this proposal,” Gleckman said.

The ‘debate’ over U.S. tariffs

Project 2025 also includes a “debate” on conservative trade policy, including opposing views on tariffs, which are taxes levied on imported goods from another country.
On one side, former White House trade advisor Peter Navarro, who served under Trump, supports U.S. tariffs, including a reciprocal levy, which Trump called for during his 2019 State of the Union address. By contrast, the project notes, Competitive Enterprise Institute president Kent Lassman wrote the U.S. should lower or repeal tariffs to make American goods more affordable.
While Trump says he hasn’t heard of Project 2025, he’s talking about the issue of tariffs a lot, Gleckman said.
Trump has called for a baseline 10% tariff on all U.S. imports and a levy of 60% or higher on Chinese goods. He also floated the idea of an “all tariff policy” to replace federal income taxes in a June meeting with Republican lawmakers. 
However, past U.S. tariffs were mostly borne by U.S. companies and consumers, according to a 2020 working paper from economists at the Federal Reserve Bank of New York, Columbia University and Princeton University.   

IRS plans could have ‘direct taxpayer impacts’

Project 2025 also proposes changes to “reduce the intrusiveness and increase the accountability” of the IRS.
If enacted, these plans could have “direct taxpayer impacts,” according to Watson.
The agency has faced increased scrutiny from Republicans, particularly after Congress approved nearly $80 billion in IRS funding via the Inflation Reduction Act of 2022.

The plan calls for agency budget cuts — a priority for some Republicans — and, in contrast, at least 20% higher resources for the Office of the Taxpayer Advocate, an independent organization within the IRS.
“Congress should provide the Office of the Taxpayer Advocate with greater resources so that it may better assist taxpayers suffering from wrongful IRS actions,” Project 2025 authors wrote.
There are also proposals to increase the number of presidential appointees, focus on technology and undertake a “serious review” of so-called information reporting, or tax forms sent to the agency by employers and financial institutions. More

Airlines grounded flights and passengers were delayed after a global IT outage Friday morning.
A failed tech update by cybersecurity firm CrowdStrike impacted Microsoft services used by airlines like American, Delta and United.
Travelers whose flights were delayed or canceled may be able to get some money back.
Financial compensation will largely depend on specific airline policy, and whether the tech malfunction is deemed a “controllable” event by the airline.

Travelers wait in line at a Delta Airlines counter at Ronald Reagan National Airport in Arlington, Virginia, on July 19, 2024. Airlines around the world experienced disruption on an unprecedented scale after a widespread global computer outage grounded planes and created chaos at airports.
Ting Shen/Bloomberg via Getty Images

Major airlines like United, Delta and American Airlines grounded flights Friday morning amid a global IT outage impacting their operations, triggering delays for travelers.
“You can imagine the mass chaos unfolding everywhere,” said Eric Napoli, chief legal officer at AirHelp, which helps fliers claim compensation for delayed or canceled flights.

“Any kind of shutdown, the bottleneck [it has] on so many flights is incredible,” he added.

Passengers impacted by flight disruptions may be entitled to a refund, hotel or meal voucher or other remuneration.
But it largely depends on the airline, travel experts said.
“There is this kind of gray area where we’re at the mercy of what the airline’s policy is,” Napoli said.
Experts are also divided as to whether the outage constitutes an event within or outside of airlines’ control — an important factor in determining whether a customer is entitled to any sort of financial compensation.

What to know about airlines’ financial duty

There’s really only one guarantee about an airline’s financial duty: Customers are owed a refund of the ticket price (and fees) if the carrier cancels their flight — regardless of the reason — and they choose not to travel on an alternate flight, according to the U.S. Department of Transportation.
This is true even for non-refundable tickets.
That means customers would get cash back on a canceled flight if they opt not to fly, and also decline an alternative like a rebooking or flight voucher, said John Breyault, travel expert at the National Consumers League.
More from Personal Finance:Global tech outage hits financial services companies, including Charles SchwabRent a car for a road trip, or drive your own?What Taylor Swift’s The Eras Tour says about ‘passion tourism’
Passengers are also entitled to a refund for “significant” schedule changes or delays, and opt not to fly, the DOT said.
However, the DOT doesn’t define “significant.” That determination is based on factors like length of delay and flight and particular circumstances, the agency said.
Starting Oct. 28, airlines will have to “promptly” and automatically pay refunds to customers, due to a Biden administration rule issued in April. That rule also defines “significant” itinerary changes, including delays of three hours for domestic flights and six hours for international flights.
However, since the rule takes effect in October, it doesn’t help customers affected by Friday’s outage. They may have to “jump through hoops with the airline” to claim a refund, Breyault said.

It may be yet more challenging for fliers who bought a ticket through a third-party booking site, and not directly with the airline, experts said.
Customers will likely have to transact with that intermediary for any kind of financial compensation, said Napoli.
Expedia, for example, said on social media Friday morning it was “experiencing high call volume and long wait times due to a global IT outage. If your needs are not urgent, please consider postponing your call and chat to avoid long hold times.”

Airline policies differ on meals, hotels

However, many travelers affected by Friday’s outage need or want to fly to their end destination, meaning they wouldn’t be entitled to a refund.
There are generally no federal guarantees for travelers in such cases. This is where specific airline policy comes into play.
“The airline is going to fly you to your destination, on the next available flight,” said Sara Rathner, a travel expert at NerdWallet.
“What might differ [between airlines] is how much compensation you might get after the fact, not just for the delays but any other costs you might incur,” she added.

The United Airlines terminal on July 19, 2024 as a global technology outage affected LAX airport in Los Angeles. 
Myung J. Chun | Los Angeles Times | Getty Images

The Transportation Department website outlines carriers’ promises to customers in the event of cancellations or delays longer than three hours. (Its dashboard outlines policies for 10 large U.S. airlines and their regional operating partners, which account for 96% of domestic passenger air traffic.)
Airlines are “required to adhere” to these promises, the agency said.
All airlines commit to rebook passengers on the same airline for free. Some will do so on a partner airline, and most will offer a meal and/or a hotel stay for long delays or cancellations, Napoli said.

Is the global IT outage ‘controllable’ or not?

However, airlines’ commitments only apply to circumstances within the airline’s control.
A “controllable” flight cancellation or delay may be due to maintenance or crew problems, cabin cleaning, baggage loading or fueling, for example, according to the Transportation Department.
It’s generally harder for consumers to get any sort of compensation for uncontrollable events like weather, Breyault said.
Experts seem to disagree on whether Friday’s outage would be deemed to be within airlines’ control.
CrowdStrike, a cybersecurity firm, experienced a major disruption on Friday linked to a tech update. That impacted organizations like Microsoft, which scrambled to restore apps and services used by a huge number of firms — including airlines.

A Delta Airlines kiosk displays a message that reads “It looks like Windows didn’t load correctly” at Ronald Reagan National Airport in Arlington, Virginia, on July 19, 2024. 
Ting Shen/Bloomberg via Getty Images

“This seems a few degrees removed from the airlines,” said Rathner of NerdWallet. “It’s software they use as part of their operations.”
However, airlines choose their vendors, Breyault said. One could argue “a failure by one of their vendors is controllable,” he said.
“I think it’ll be something consumers should keep an eye on,” Breyault said.
Passengers should keep any receipts for unexpected costs incurred due to a delay or cancellation — like those for lodging and meals — for financial proof when filing a claim with an airline or travel insurer, for example, Rathner said.
“You may get some of that money back, so don’t throw those receipts away,” she said. More

Amid a global IT outage, some investors were experiencing disruptions on Friday at financial services companies, including Charles Schwab, one of the country’s largest brokerage firms.
The company’s website said “certain online functionality may be intermittently slow or unavailable,” and the app warned users about duplicate trades.
DownDetector did not show significant outage reports for Vanguard or Fidelity.

Pekic | E+ | Getty Images

Amid a widespread global IT outage, some investors were experiencing disruptions on Friday at financial services companies, including Charles Schwab, one of the country’s largest brokerage firms.
The issues stem from a faulty software update from cybersecurity company CrowdStrike, which affected businesses worldwide, including airlines, banks and media outlets.

CrowdStrike CEO George Kurtz said the company is “actively working with customers impacted by a defect found in a single content update for Windows hosts.” 
More from Personal Finance:CFPB cracks down on popular paycheck advance programs. What that means for workersEducation Department to pause student loan payments for millions amid legal battleHere’s how the election could impact the municipal bond market, experts say
DownDetector, which tracks user-reported online outages, showed roughly 500 reports for Charles Schwab around 10 a.m. ET on Friday.
A banner across Charles Schwab’s website said “certain online functionality may be intermittently slow or unavailable,” noting that phone services may be disrupted with “longer than usual hold time.”
The firm’s app warned users not to place trades twice “as duplicate trades may be created,” and said the company was “working with the vendor to resolve the issue.”

Charles Schwab did not immediately respond to CNBC’s request for comment.

DownDetector did not show significant outage reports for Vanguard or Fidelity.
“After the widespread third-party outage, Vanguard’s portfolio management trading functions across all regions are operating as normal and there is no current impact to our products or pricing,” a Vanguard spokesperson said. “We continue to monitor and assess the situation, and are working diligently to ensure business continuity for our clients globally.” 
Fidelity told CNBC the company was aware of the issues and that it did not appear to be impacted as of midday Friday.

Don’t miss these insights from CNBC PRO More

Target is the latest retailer to stop accepting personal checks as a form of payment at checkout.
As the U.S. steadily moves toward a “check zero” world, here’s who may be affected.

Nadya Lukic | E+ | Getty Images

Most Americans may not even remember the last time they wrote a check.
Only 15% of adults said they wrote a few checks a month in 2023, according to a recent report by GoBankingRates. At the time of the late November survey, 46% of the more than 1,000 respondents said they hadn’t written a single check in 2023.

These days, consumers are far more likely to “tap and go.”
In fact, in the years since the Covid pandemic, Americans have fully embraced contactless and digital payment methods, while check writing has steadily declined into near-oblivion.

Some retailers rule out paper checks

As of July 15, Target joined a growing list of retailers, including the Aldi supermarket chain, Whole Foods, Old Navy and Lululemon, that no longer accept personal checks as payment.
Even more businesses are likely to follow suit, according to Scott Anchin, vice president of operational risk and payments policy for the Independent Community Bankers of America. That’s in part because check fraud is a significant issue, he said.

“The check is inherently insecure,” Anchin said. “Handing over a check is akin to sharing a screenshot of bank details alongside a Venmo transfer — no one would consider this safe.”

With significant advancements in security, thanks to authentication, monitoring and data encryption, the shift by retailers and consumers to contactless and digital payment methods will only continue to grow, accelerating the move toward a “check zero” world, he said.
So, if personal checks are heading toward extinction, who, if anyone, is affected?

Who uses checks anyway?

In 2024, check writers skew older and are likely at the margins of the banking community, according to Anchin. Americans over the age of 55 are the most likely to write checks every month, GoBankingRates also found.
However, it wasn’t always that way.
Although checks, as we know them today, first originated in the 11th century, they didn’t become mainstream until the early 20th century, following the Federal Reserve Act of 1913, according to a historical survey by the Federal Reserve Bank of Atlanta.
But back then, “everyday people didn’t have checking accounts, that was for rich people,” said Stephen Quinn, professor of economics at Texas Christian University and co-author of the Atlanta Fed’s report. “It wasn’t until after World War II that checking accounts were a common thing.”
Postwar prosperity greatly expanded the use of checking accounts to middle-class households, making checks the most widely used noncash payment method in the U.S., the Atlanta Fed found.
Personal checks continued to gain steam until the mid-1990s, when credit and debit cards largely took over. Since 2000, check-writing has plummeted by nearly 75%.

Despite the rapid decline, “a form of payment with a thousand-year history is unlikely to vanish overnight,” the Atlanta Fed report said.
And yet, today’s young adults are increasingly eschewing the traditional banking and credit infrastructure altogether in favor of peer-to-peer payment apps.
Quinn said his students rely almost exclusively on digital wallet payments such as Apple Pay, Venmo and Zelle — hardly anyone carries cash, and it’s likely that few even know how to write a check.
More from Personal Finance:CFPB cracks down on popular paycheck advance programsMore Americans are struggling even as inflation coolsI lost my wallet. Here’s what experts say I should do
In this way, mobile payment apps have become de facto bank accounts — even though, unlike banks or credit unions, these financial services are not FDIC-insured.
Still, there remains a place for personal checks, Quinn said.
“The paper check might linger where it began, at the high end — for large one-off payments,” he said, such as charitable donations or real estate transactions. “In this way, checks might hold on for some time.”
Subscribe to CNBC on YouTube.

Don’t miss these insights from CNBC PRO More

The U.S. Department of Education says it will pause millions of student loan borrowers payments while it defends its relief plan against legal challenges.
Borrowers enrolled in the Biden administration’s new repayment plan, known as SAVE, will be placed “in an interest-free forbearance,” according to a statement from U.S. Secretary of Education Miguel Cardona.

US President Joe Biden speaks about student loan debt relief at Madison Area Technical College in Madison, Wisconsin, April 8, 2024. 
Andrew Caballero-Reynolds | AFP | Getty Images

The U.S. Department of Education says it will pause millions of student loan borrowers’ payments while it defends its relief plan against legal challenges.
Borrowers enrolled in the Biden administration’s new repayment program, known as SAVE, will be placed “in an interest-free forbearance,” according to a statement from U.S. Secretary of Education Miguel Cardona.

A federal appeals court in Missouri issued a ruling on Thursday blocking the entire plan, which the White House says roughly 8 million people are enrolled in.
Lawsuits by Republican-led states, including Arkansas, Florida and Missouri, argue that the Biden administration overstepped its authority with SAVE, or Saving on a Valuable Education, and essentially was trying to find a roundabout way to forgive student debt after the Supreme Court blocked its sweeping plan in June 2023.
Missouri Attorney General Andrew Bailey, a Republican, wrote Thursday on X that the ruling against SAVE was a “HUGE win for every American who still believes in paying their own way.”
“The Court granted our emergency motion to BLOCK Joe Biden’s entire illegal student loan plan, which would have saddled working Americans with half-a-trillion dollars in Ivy League debt,” Bailey wrote.
Just 0.3% of federal student borrowers attended Ivy League colleges, according to an estimate by higher education expert Mark Kantrowitz.

More from Personal Finance:What Project 2025 could mean for your wallet’Rentvesting’ can be a path to owning a home3 money moves to make ahead of a Fed rate cut
SAVE comes with two key provisions that legal challenges have targeted: It has lower monthly payments than any other federal student loan repayment plan, and it leads to quicker debt erasure for those with small balances.
“It’s shameful that politically motivated lawsuits waged by Republican elected officials are once again standing in the way of lower payments for millions of borrowers,” Cardona said.
Before the legal challenges, the Education Department had already forgiven $5.5 billion in student debt for 414,000 borrowers through the SAVE Plan.

Legal challenges expected to continue

The lawsuits added urgency to the need for the Biden administration to deliver on sweeping loan forgiveness, said Aissa Canchola Bañez, political director for Protect Borrowers Action.

“Borrowers shouldn’t be expected to live court judgment by court judgement,” Canchola Bañez said.
However, President Joe Biden’s do-over plan for wide-scale debt cancellation is almost certain to face the same legal challenges as SAVE, experts say. The Biden administration is expected to start trying to deliver that relief weeks before the election.

Don’t miss these insights from CNBC PRO More

If looking at your bills and bank account has you feeling frustrated and financially drained, you may all too well relate to a lyric from Taylor Swift’s “The Prophecy” — “and I sound like an infant, feeling like the very last drops of an ink pen.”
Some strategies can be practiced to help alleviate the feeling of financial defeat.
Here’s how to build a better budget, with inspiration from Swift’s songs.

Taylor Swift performs at Friends Arena on May 17, 2024 in Stockholm, Sweden.
Michael Campanella/tas24 | Getty Images Entertainment | Getty Images

Pop singer-songwriter and cultural phenomenon, Taylor Swift, is one of the most in-demand acts today, with the iconic Eras Tour the first to cross the $1 billion threshold.
There are so many impactful lessons that can be learned from the electrifying Swift; her anthology of songs includes lessons in love and loss, friendship, finding yourself, being true to yourself, how to shake off disappointments and live your best life, and so much more. Even if she’s not singing about money specifically, Swift’s lyrics also inspire financial lessons we can learn from.

Take budgeting: If looking at your bills and bank account has you feeling frustrated and financially drained, you may all too well relate to Swift’s lyric “and I sound like an infant, feeling like the very last drops of an ink pen.”

More from CNBC’s Advisor Council

That’s not to say that things are hopeless. Thankfully, some strategies can be practiced to help alleviate the feeling of financial defeat. But you should dive in headfirst, fearless.
As Swift sings, “This is in your power, after all.”

Don’t wait to get started

Starting a new financial way of life can feel daunting. But take inspiration from Swift — “It only hurts this much right now … Breathe in, breathe through, breathe deep, breathe out.”
Set yourself up for success. Take this time to analyze your income and your spending. The sooner you gather this data, and the sooner you can begin, the better. I created a free budget worksheet that can be a helpful tool along the way. 

‘Speak now’

As you set your budgeting goals, speak them out loud. Manifest them to yourself and the universe.
Write down your goals, as studies show writing goals raises the chances of achieving them. If you have a trusted support system, tell your friends and family so they are aware of the changes you’re making so that they can help support you on your new path and be there to hold you accountable.
Building this foundation is an important early step.

Pay off debts like ‘a mastermind’

Once you have assessed where you are now and have laid out where you’d like to be, you have to map the steps you’ll need to take to get there. Most often, tackling debt is one of those steps.
Focus on paying off debts as best you can and practice healthy financial habits; pick a payoff strategy you can stick with that lets you knock down balances while using other strategies to avoid racking up new debt.
Eventually, you’ll find yourself debt-free and singing, a la Swift: “I laid the groundwork and then, just like clockwork, the dominoes cascaded in a line … it was all by design, ’cause I’m a mastermind.” 

‘Let old [spending] habits die screaming’

You don’t have to, as Swift puts it, “get older but just never wiser.” As you’re building your financial plan and reviewing your budget data, keep an eye out for common bad financial habits that you can correct or modify.
For example, do you have a habit of “feelin’ so Gatsby,” as Swift describes, and spending lavishly? Do you tend to impulse spend? Do you subscribe to retail therapy? Are you finding a pattern of trying to keep up with the Joneses?

Just remember — you don’t need to be literally bejeweled to “make the whole place shimmer” like Swift. There’s no need to buy things just to impress others. You should live the lifestyle that is best for you.

Review your subscriptions, memberships

Do you use all of your streaming services? Are you subscribed to something that doesn’t provide the value equivalent to what you’re paying for it? Cancel it.
If you’re “down bad crying at the gym,” as Swift puts it, maybe cancel your gym membership. (After all, at-home workouts are way less expensive, and walks outside are both free and good for your mental health. It could be a win-win.) 

Lean into free ways to have fun

Taylor Swift performs onstage during “Taylor Swift | The Eras Tour” at Stadion Letzigrund Zürich on July 09, 2024 in Zurich, Switzerland. 
Noam Galai/tas24 | Getty Images Entertainment | Getty Images

Having fun doesn’t always have to cost money.
Libraries are a great source of entertainment and your city likely provides free or low-cost classes and activities. Laughing with friends is free, love doesn’t cost a thing, and cherishing the people you love in your life is priceless. And if you’re looking for more to do, google “free fun things” in your area. Almost every area has a local blogger who would be happy to show you how to have a good time without spending good money. 
Aim to be, as Swift puts it, “too busy dancing to get knocked off our feet. Baby, we’re the new romantics, the best people in life are free.” 

Leverage technology

Take inspiration from Swift and use technology to your advantage to say “get it off my chest, get it off my desk” about your recurring bills and for building your savings. Automate funds to go directly into your savings account when you get paid, and set your regular bills to auto pay so your mindset can stay in a “Lavender Haze” instead of seeing “Red.”
— By Winnie Sun, co-founder and managing director of Irvine, California-based Sun Group Wealth Partners. She is also a member of the CNBC Financial Advisor Council. More

A federal appeals court on Thursday issued an order temporarily halting the Biden administration from implementing its new student loan repayment plan, known as SAVE.

President Joe Biden delivers remarks on new Administration efforts to cancel student debt and support borrowers at the White House on October 04, 2023 in Washington, DC.
Kevin Dietsch | Getty Images

SAVE plan mired in legal troubles

The Biden administration rolled out the SAVE plan in the summer of 2023, describing it as “the most affordable student loan plan ever.” Indeed, the terms of the new income-driven repayment plan are the most generous to date, making it controversial among critics of debt forgiveness.
So far, around 8 million borrowers have signed up for SAVE, according to the White House.

SAVE comes with two key provisions that legal challenges have targeted: It has lower monthly payments than any other IDR plan, and it leads to quicker debt erasure for those with small balances.

In late June, two federal judges in Kansas and Missouri temporarily halted those parts of SAVE, after a number of red states argued that the Education Department overstepped its authority and essentially was trying to find a roundabout way to forgive student debt after the Supreme Court blocked its sweeping plan in June 2023.
The Biden administration successfully appealed the injunction against SAVE that stopped it from lowering borrowers’ payments, but it now may be blocked from doing so again. Prior to Thursday’s ruling, the expedited forgiveness provision was still on hold.
Before the legal challenges, the Education Department had already forgiven $5.5 billion in student debt for 414,000 borrowers through the SAVE Plan. More

The election outcome and future policy could impact the municipal bond market, experts say.
A popular asset for higher earners, muni bonds generate interest that is federally tax-free and avoids state levies when investors live in the issuing state.
However, there’s uncertainty around interest rates, income taxes and public financing.

The first presidential debate between U.S. President Joe Biden and former U.S. President and Republican presidential candidate Donald Trump is projected on a screen projector during a watch party hosted by the Michigan Conservative Coalition in Novi, Michigan, U.S., June 27, 2024. 
Emily Elconin | Reuters

With interest rate cuts from the Federal Reserve likely on the horizon, municipal bonds could soon see higher demand, experts say. But there are several factors to watch, including the election outcomes of the presidential and congressional races, and future policies.
A popular asset for higher earners, muni bonds generate interest that is federally tax-free and avoids state levies when investors live in the issuing state. Munis typically have lower default risk than their corporate counterparts.

The election outcome could have a “massive impact” on the future of the U.S. muni bond market, said Tom Kozlik, head of public policy and municipal strategy at HilltopSecurities. Future policies from the next president and Congress, such as changes to taxes or public financing, could make munis more or less attractive to investors.
More from Personal Finance:How on-time rent payments can help ‘credit invisible’ consumers be seenLower capital gains tax, SNAP cuts: What Project 2025 could mean for your walletHere’s where 2024 vice presidential picks stand on Social Security

How muni bonds have fared for investors

After losses in 2022 and 2023, muni bonds have been slightly positive in 2024, with roughly a 1% year-to-date return for the S&P municipal bond index, as of July 17.
However, “muni yields are at their highest levels in years, offering significantly better compensation than in recent history,” said Sean Beznicki, director of investments for VLP Financial Advisors in Vienna, Virginia.
Those yields could fall quickly when the Fed cuts interest rates and demand increases for muni bonds, said Kozlik. Bond yields and prices move in opposite directions.

Muni yields are at their highest levels in years, offering significantly better compensation than in recent history.

Sean Beznicki
Director of investments for VLP Financial Advisors

Of course, when weighing muni and corporate bonds, you need after-tax yields for an apples-to-apples comparison.
For example, let’s say you’re in the 35% tax bracket, comparing an 8% corporate bond to a 5.25% muni bond. While 8% seems like a higher return, you would receive 5.2% after federal taxes. 
Generally, the lower your income, the less of a tax benefit you’ll receive from muni bonds.
Ultimately, the decision to buy or sell muni bonds “really comes down to sort of your independent situation,” including goals, risk tolerance and timeline, Beznicki added.

Tax uncertainty for muni bonds

Without action from Congress, trillions in tax cuts will expire after 2025 and raise taxes for most Americans.
The Tax Cuts and Jobs Act of 2017, or TCJA, lowered federal income brackets, with the top rate falling to 37% from 39.6%. The $10,000 cap on the federal tax break for state and local taxes, known as the SALT deduction, will also sunset after next year.
Former President Donald Trump wants to fully extend TCJA cuts, while President Joe Biden aims to keep tax breaks for those earning less than $400,000. Either way, funding those extensions could be difficult amid the federal budget deficit.
If the tax cuts expire after 2025, muni bonds “become more attractive,” according to certified financial planner Barry Glassman, founder and president of Glassman Wealth Services in McLean, Virginia. He is also a member of CNBC’s Financial Advisor Council.

Credit risk for municipal bonds

Future credit risk could also be affected through policy changes made by the party that controls the White House and Congress, experts say. In addition to taxation, lawmakers can pass funding for state and local governments, which can boost credit quality for muni bond issuers.
Enacted during the Covid-19 pandemic, the American Rescue Plan of 2021 sent billions to state and local governments, which has contributed to the strength of muni bond credit quality, Kozlik said.
“We might not ever see something like that again,” he said.
Still, in 2024, municipal credit upgrades have outpaced downgrades by a ratio of 2.1 to 1, as of March 31, according to Moody’s Ratings.

The federal exemption for muni bond interest

Amid the looming 2025 tax cliff and federal budget deficit, some experts also worry about the federal tax break for muni bond investors, Kozlik said.
Although the exemption remained intact through TCJA negotiations, federal lawmakers enacted other changes that raised levies on muni bond issuers. One provision eliminated the tax-exempt status for so-called “advance refunding bonds,” which allowed municipalities to refinance once before their bonds’ redemption.
As 2025 approaches, legislators will focus on the deficit and TCJA extensions. While the tax break for muni bonds doesn’t face an “imminent threat,” it could be revisited as lawmakers seek funding, Kozlik said.

Don’t miss these insights from CNBC PRO More