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Senate to vote on stimulus measures, Biden's tax plan could impact wealthiest: How the headlines could affect your money

Pelosi and the White House continue talks while the Senate votes on smaller stimulus measures.

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U.S. President-elect Joe Biden spoke at Beech Woods Recreation Center in Southfield, Michigan during the 2020 presidential election campaign on Oct. 16.
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Markets monitor stimulus progress, while the Senate will vote on more stimulus measures, and high-earners consider the impact of Biden's tax plan. Here's how the headlines could affect your money. 

Markets fall, and rise, on stimulus hopes

The major indexes fell Monday as investors kept an eye on stimulus talks. On Sunday, House Speaker Nancy Pelosi gave the White House 48 hours to come to a deal. 

Pelosi and Treasury Secretary Steven Mnuchin plan to speak again before Tuesday's deadline, and the market rose in the morning on traders' optimism that a stimulus deal could happen.

Senate to vote on stimulus measures

While negotiations for a larger stimulus package are underway, the Senate plans to vote on several smaller aid bills this week. Those include a vote Tuesday for more Paycheck Protection Program (PPP) small business funding, and a $500 billion bill on Wednesday that includes school funding and enhanced unemployment benefits.

Neither proposal includes a second round of $1,200 stimulus checks. 

Biden's tax plan could hike rates on richest Americans

Most Americans would see tax cuts under Democratic presidential nominee Joe Biden's tax plan, but those earning more than $400,000 could see double-digit increases in their statutory tax rates, according to calculations from the Tax Foundation and Tax Policy Center. In high-tax locales like California, New Jersey, and New York City, they estimate, the combined state and local rate could top 60%.

It's important to note that few taxpayers actually pay those top rates after deductions, credits, and other tax breaks come into play. Although the top bracket is currently 37%, the Tax Foundation estimates the effective rate for top earners is just 26.8%.

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Here's how tax brackets actually work

Video by David Fang

Words you've heard: Statutory and effective tax rates

Each year, the government sets the tax brackets and accompanying statutory tax rates, or the rate for taxable income that falls within each bracket. The effective tax rate is how much an individual actually pays. It's often much lower due to the way income taxes are calculated, and the various tax breaks that can help lower your bill. 

Although the daily news can have an impact on your wallet, remember to take a long-term outlook when it comes to decisions on spending, saving, and investing.

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