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Remind Clients: Local Elections Matter, Too

By Holly SwanExecutive Director, Advisor Institute

With all eyes already on the 2024 presidential election, this year's state and local elections are worthy of your attention too as the results may have a lasting impact on client portfolios.

State elections can impact your clients via proposed tax changes. For example, the state-level income tax in Kentucky, Louisiana and Mississippi could be affected depending on this year's election outcomes. Incorporate state elections into conversations by asking questions such as:

"If our state legislature post-election is majority [insert party] and follows through on its proposed tax changes, are you open to making adjustments to your investment income mix to optimize next year's tax outcome?"

Even in states with no income tax, local election results can feature spending measures influencing property and sales taxes. As an After-Tax Advisor, you should prepare to discuss these potential changes and the impact to municipal bond allocations with clients.

While some may want to buy only local issuances as a way of putting their money to work in their own neighborhood, it's important to emphasize the value of diversification and asset location. If a client insists on owning only general obligation (GO) bonds from the municipality in which he/she lives, consider asking:

"Whose taxes could be raised in the future to help retire the additional debt being taken on by our city and state?" (Answer: "Yours.")

Bottom line: While it may not be possible to stay abreast of every local, state or federal election issue, After-Tax Advisors need to understand the possible tax implications each November and discuss broadly applicable ideas with their clients.