Midterm elections 2022: Here are the key things at stake for your money

The November midterm elections are here and the state of the economy is top of mind for most Americans. Many plan to cast their vote for whichever candidates they feel can best turn the tides of inflation and bring down sky-high prices on gas, groceries and other essentials.

The vast majority of U.S. adults — 82 percent — rated inflation as extremely or very important for the government to address, according to a recent poll by Monmouth University. Comparatively, fewer respondents assigned such high ratings of importance to other hot-button issues such as abortion (56 percent), gun control (51 percent) and climate change (49 percent).

Even back in February, 74 percent of consumers had indicated inflation was negatively impacting them, a Bankrate poll found.

“The midterm elections will be important in terms of defining which party is or isn’t in the political driver’s seat in Congress over the next two years,” says Mark Hamrick, Bankrate senior economic analyst and Washington bureau chief. “If a recession does emerge as many fear and expect, it will again fall to elected officials to prescribe and vote on possible legislative responses. In turn, many of these factors may have impacts going into the next general/presidential election.”

Here we’ll take a look at how the outcome of the midterm elections could affect your money, as well as the economy as a whole.

How the midterm congressional elections could impact the economy and your finances

Democrats have held both chambers of Congress for the past two years — resulting in a government trifecta, which is when the executive branch and both legislative branch chambers are all controlled by the same political party.

This could change in the midterm elections if Republicans were to take control of one or both chambers of Congress.

If Republicans take control of Congress

More than 2 in 5 adults — 43 percent — rate their personal financial situation as worse now than it was before President Joe Biden was elected in 2020, according to a recent Bankrate survey. Comparatively, 39 percent say their finances have remained the same and 18 percent say they’ve gotten better.

Of those who state their finances have worsened, nearly 7 in 10 — 69 percent — say Biden is to blame, while a respective 71 percent and 54 percent blame Democrats and Republicans.

Voters concerned about inflation and the state of their own personal finances may feel a disruption of the status quo could improve the economy. This could ultimately lead to Republicans gaining a majority in one or both houses of Congress. A net gain of five seats would allow the party to win control in the House of Representatives, while a gain of just one seat would give Republicans control of the evenly divided U.S. Senate.

A Republican takeover of one or both chambers of Congress would result in a divided government, in which one party controls the legislative branch and another controls the executive branch.

Some feel a divided government would result in few meaningful steps to improve the economy. Bipartisan action after the midterms to combat inflation would be difficult with a divided government, according to an August Wells Fargo Investment Institute report.

A slight majority — 53 percent — of Americans feel the midterm elections will result in divided government and gridlock, an October Axios/Ipsos poll found.

The inability of Congress to pass legislation that helps combat inflation may mean the primary driver in potentially bringing down inflation levels is the Federal Reserve, which has hiked interest rates six times so far this year. The Fed’s goal of raising rates is to slow the economy to bring down inflation.

If the GOP gains control of one or both chambers of Congress, lawmakers may attempt to make the 2017 Republican tax cuts permanent in an effort to grow the economy and create jobs. Republicans may also seek to repeal the corporate tax hikes Biden signed into law in August.

Republicans gaining control of both houses may allow lawmakers to shift the focus back to domestic energy production — although such initiatives wouldn’t likely receive support from the Biden administration. One such initiative is the Simplify Timelines and Assure Regulatory Transparency (START) Act, proposed by Sen. Shelley Moore Capito (R-West Virginia). It would limit the authority of states to thwart major energy projects, and it would approve the construction of the Mountain Valley Pipeline, a natural gas pipeline that would run from southern Virginia to northwestern West Virginia.

If Democrats maintain control of Congress

If control of Congress remains with Democrats, legislators may make further attempts to pass measures from Biden’s $1.7 trillion Build Back Better Act that did not make it into law.

In an October letter to her caucus, House Speaker Nancy Pelosi (D-California) identified agenda issues that are a “top priority for a Democratic majority in the next Congress” as:

• Universal, free pre-kindergarten
• Paid family and medical leave
• Child Tax Credit extension
• Reduction in costs of home health care, childcare and housing

Critics of the failed Build Back Better Act — and its offshoot, the Inflation Reduction Act, which passed in August — argue that many of the measures are dedicated to spending money and are therefore bad for reducing inflation.

The Build Back Better Act contained more than $1.7 trillion in economic and infrastructure proposals. It sought to lower education and healthcare costs, as well as to extend the expanded child tax credit. It failed to make it through the Senate, however, after facing opposition from some moderate Democratic Senators.

The Inflation Reduction Act aims to lower inflation by reducing the deficit, curbing prescription drug costs and investing in clean energy. It seeks to combat climate change by increasing reliance on renewable energy sources like wind and solar power, as well as reducing greenhouse gas emissions and fossil fuel pollution. The act would also increase the minimum tax rate to 15 percent for some large corporations.

By some estimates, the Inflation Reduction Act would have no meaningful near-term impact on inflation but would lower inflation by around 0.1 percentage points by the middle of the first decade.

If Congress becomes divided

The GOP has an 84 percent chance of taking over the House of Representatives, according to FiveThirtyEight. The opinion poll website forecasts the Senate race to be more of a toss-up — although it’s been slowly shifting in Republicans’ favor.

Congress would become divided if each of the two chambers is controlled by a different party. This could result in gridlock when it comes to passing legislation, although some lawmakers may attempt to win over moderates from their opposing party to help push through their initiatives.

However, a divided Congress may ultimately make it difficult to pass significant legislation such as budget reconciliation bills — especially considering a non-divided Congress narrowly avoided a government shutdown in September after failing to agree on federal funding measures.

How the midterm state-level elections could impact your money

In November, midterm elections will be held for the governorship in 36 states. Legislative elections will be held in the vast majority of states. More than half of the states will also hold elections for state treasurers and secretaries of state.

At the state and local level, elected officials play a big part in shaping policies within key areas such as taxes, infrastructure, housing, schools and labor market rules. A change in the political party that holds an office or legislative majority can lead to drastic differences in how a state or municipality operates.

Here are some state-level measures on ballots in the midterm elections that could affect the personal finances of those who live there:

Arizona

• Predatory Debt Collection Act: Proposition 209 would lower interest rates on medical debt to a maximum of 3 percent annually from the current maximum of 10 percent. It would also cap the amount of one’s weekly income for wage garnishment at 10 percent (down from the current 25 percent).
• Property Tax Exemptions Amendment: Proposition 130 would enable state lawmakers to decide the amount and qualifications of property tax exemptions for groups such as those with permanent disabilities as well as disabled veterans.

California

• Increased tax on millionaires: Proposition 30 would raise the tax on personal income above $2 million by 1.75 percent. Revenue generated would fund wildfire prevention initiatives as well as zero-emission vehicle programs.

Colorado

• Lower the state income tax: Proposition 121 would lower the state’s income tax rate from 4.55 percent to 4.40 percent.

Florida

• No increased taxes after storm-proofing: Amendment 1 would make it illegal when determining a property’s assessed value to take into consideration flood resistance improvements made to a home. This would enable residents who storm-proof their homes to do so without their property taxes increasing as a result.
• Increased tax exemption for public service workers: Amendment 3 would provide an additional $50,000 tax exemption on the assessed value of property owned by public service workers including emergency medical workers, teachers, correctional officers and police officers.

Georgia

• Tax breaks for properties hit by natural disasters: Amendment 2 would allow local municipalities to give temporary tax breaks to residents whose properties are damaged by natural disasters.

Idaho

• Advisory question: Voters are asked to provide their position by selecting “approve” or “disapprove” regarding measures already enacted by the state legislature. These include changing the income and corporate tax rates to a flat 5.8 percent, sending rebates to taxpayers, and allocating $410 million in sales tax revenue annually to the public school income fund.

Illinois

• Workers’ Rights Amendment: Amendment 1 would create constitutional protections for unions by preventing future laws from prohibiting workers from organizing, negotiating and collectively bargaining.

Louisiana

• Property tax exemptions for disabled veterans: Amendment 2 expands property tax exemptions for eligible disabled military veterans, and it extends exemptions to the surviving spouses of deceased veterans with disabilities.

Massachusetts

• Additional tax on income: Question 1 on the ballot proposes an additional 4 percent tax on annual income over $1 million, in addition to the flat-rate income tax of 5 percent. Revenue generated would fund transportation and education in the state.

Nebraska

• Minimum wage increase: Initiative 433 increases the state’s minimum wage incrementally to $15 an hour (from $12 an hour) by 2026.

Nevada

• Minimum wage increase: Question 2 raises the state’s minimum wage to $12 an hour (from $10.50 an hour) for all employees by July 1, 2024.

Oregon

• Access to health care: Measure 111 would make it a fundamental right of every resident to receive affordable health care. Supporters say it will bring down the number of uninsured people in the state.

South Dakota

• Expanded Medicaid coverage: Constitutional Amendment D would require the state to offer Medicaid benefits to those ages 18 to 65 who earn less than 133 percent of the federal poverty level.

Tennessee

• Right to Work Amendment: Constitutional Amendment 1 would make it illegal for workplaces to require membership in a labor union as a condition of employment.

Texas

• Property tax relief: Proposition 1 would reduce the amount of a home’s value that can be taxed for certain purposes, when it is owned by qualifying elderly or disabled homeowners.

Washington, D.C.

• Tip Credit Elimination Act: Initiative 82 increases the minimum wage for tipped employees (currently $5.35 an hour, provided their tips make up the difference) to the minimum wage for all other workers, which is $16.10 per hour.

West Virginia

• Tax exemptions for business equipment: Amendment 2 would make personal property used for business purposes exempt from ad valorem property taxes. Examples include equipment, machinery and inventory.

Bottom line

The economy is the most significant issue in many voters’ minds as they head to the polls on Nov. 8. Ultimately, whether Congress becomes divided may determine the likelihood meaningful legislation is passed that could improve the U.S. economy.

On a state level, many voters throughout the country will help determine whether changes take place regarding property and income taxes, minimum wage requirements, workplace laws and more.