Regardless of who wins the U.S. presidency this November, the next occupant's first year in (or return to) the Oval Office will be during a potentially tumultuous year for taxes.
That’s because 2025 is when the Tax Cuts and Jobs Act’s (TCJA) individual provisions expire.
So, Congress will be working to save or ax, depending on party affiliation, many of the tax laws we’ve been living with since the Republican tax reform bill was enacted in the waning days of 2017.
Scarce tax details from candidates: Neither Democratic nominee Vice President Kamala Harris nor GOP repeat hopeful Donald J. Trump have talked in detail about taxes.
Consensus is that Harris will hew closely to President Joe Biden’s positions on taxes.
That generally means promises not to raise taxes on anyone making less than $400,000; increase the top tax rate for the top 1 percent of earners; raise the corporate tax rate; tweak capital gains tax law; and expand tax credits, especially for taxpayers with families.
Trump obviously will want to continue the landmark tax bill he signed. The former president recently warned that if the TCJA expiring provisions weren’t renewed, Americans would see a “four times tax increase.”
Earlier tax bill stumble: A pre-election, bipartisan effort to deal with some other popular expired tax provisions failed earlier in August.
But once the election is over and a new Congress is sworn in, we could see the two parties coalesce and finalize tax matters, including the fate of the TCJA provisions before they end on Jan. 1, 2026.
Quit laughing! We tax geeks (and all taxpayers) gotta hope!
Future tax changes depend on election: How much of the TCJA will remain will depend, of course, on Nov. 5’s results. The political makeup of the House, Senate, and White House will determine which tax provisions will be preserved or punted.
And part of that decision making will be based on just what was accomplished by the Tax Cuts and Jobs Act changes, the most dramatic rewrite of tax laws since the 1986 tax reform bill.
The analyses are, naturally, skewed depending on which side of the aisle is looking into the law. So, this weekend’s Saturday Shout Outs go to a couple of recent articles on the TCJA from two Washington, D.C.-based policy groups.
One is from a nonpartisan organization that tends to favor more liberal/progressive policies. The other is from a more conservative tax policy think tank.
TCJA changes didn’t meet goals: The 2017 Trump Tax Law Was Skewed to the Rich, Expensive, and Failed to Deliver on Its Promises, argues the Center on Budget and Policy Priorities.
That resulted in erosion of the U.S. revenue base, write Chuck Marr, Samantha Jacoby, and George Fenton. The trio says tax cuts for people making more than $400,000 should be allowed to expire, since “the provisions primarily benefiting high-income households are costly and do not trickle down. They should all end in 2025.”
Plus, argue Marr, Jacoby, and Fenton, the GOP tax reform law failed to deliver promised “trickle down” economic benefits in other areas. Although Trump Administration officials claimed the law’s centerpiece corporate tax rate cut would “very conservatively” lead to a $4,000 boost in household income, workers who earned less than about $114,000 on average in 2016 saw “no change in earnings” from the corporate tax rate cut, while top executive salaries increased sharply.
TCJA lowered compliance costs: The more conservative Tax Foundation focuses on the tax simplification that advocates of the TCJA promised in its piece answering How Did the Tax Cuts and Jobs Act Simplify the Tax Code?
If the TCJA provisions expire at the end of next year, tax filing will get more complicated, and costly. for millions of Americans, writes Alex Muresianu. An earlier Tax Foundation study estimated the TCJA deduction changes saved taxpayers between $3.1 billion and $5.4 billion per year in compliance costs.
Similarly, the reduced burden of Alternative Minimum Tax (AMT) filing saved taxpayers an estimated $4.6 billion, “meaning total simplification benefits of potentially $10 billion per year (worth more today due to inflation and growth in the economy),” Muresianu added.
Political path unclear: Both the revenue concerns and practical effects on taxpayers should be considered during the coming discussion of what to do with the TCJA expiring provisions. Unfortunately, that doesn’t happen too often on Capitol Hill.
But I have hope — again, stop snickering! — given that a group of Republican and Democratic lawmakers from the House and Senate were able to agree on a tax bill earlier this year, even if they couldn’t complete the work.
You also might find these items of interest:
- Kamala Harris tax policy predictions
- A look at Project 2025, the purported guide to Trump 2.0
- Tax-free tips might not actually help intended workers, and could increase the U.S. deficit
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