After a presidential campaign that saw a steady stream of tax proposals aimed at a wide range of constituents, Donald Trump appears to be due to return to the White House next January, when he can begin trying to deliver on those promises.
One of the most significant areas of focus will be on the expiring provisions of the former and future president’s 2017 Tax Cuts and Jobs Act, which was a signature achievement of his first term. Republicans have taken control of the Senate, but control of the House remains in question as votes continue to be counted.
Extending all the provisions could cost as much as $4.6 trillion, according to Rochelle Hodes, Washington National Tax Office principal at Top 25 Firm Crowe.
Eva Marie Uzcategui/Bloomberg
“Most of them are related to individuals,” she explained. “If they are allowed to expire, that would raise the tax for many individuals, which is an unattractive proposition for any president or for Congress. The decision will have to be made about which will be allowed to expire, whether or not some of the provisions will be changed in order to accommodate whatever budget goals are agreed upon, then the decision and consensus will have to be made concerning offsets to pay for the resolution of expiring provisions.”
The Republican Party platform called for making permanent many provisions of the TCJA, including doubling the standard deduction, and there is strong interest in reducing the corporate tax rate below the act’s 21% (though perhaps by only a percentage point).
Trump also expressed a willingness to revisit the $10,000 limit on state and local tax deductions that was enacted as part of the TCJA, following complaints from Republicans representing states with high local tax rates.
Another central provision Trump and the Republicans will look to restore is the Section 174 deduction for R&D expenditures — which is widely popular on both sides of the aisle in Congress.
“We saw pervasive support for that in a bipartisan bill in the House at the beginning of the year,” said Kasey Pittman, director of tax policy at the Washington tax council practice of Top 10 Firm Baker Tilly. “The vote tally was 374 for the bill, and 70 against.”
The bill failed in the Senate but not due to lack of support for the business provisions, according to Pittman.
“There was some politics involved. For example Senator Crapo, believing that Republicans will have more leverage after the 2024 election, didn’t wish to provide as much support for changes to the Child Tax Credit as the bipartisan bill called for. The stumbling block in the Child Tax Credit wasn’t the top line amount of the credit, but the refundability of the credit,” she said. “I think there’s just an ideological difference between the parties on how the credit should function.”
Beyond those major issues, Trump also proposed a number of narrowly focused tax ideas on the campaign trail, including:
- Eliminating taxes on tips of restaurant and hospitality workers;
- Eliminating taxes on Social Security benefits;
- Eliminating taxes on overtime;
- Eliminating taxes on firefighters, police officers and members of the military;
- Providing a tax credit for family caregivers taking care of parents or loved ones; and,
- Allowing those who buy a car that was made in the U.S. to write off the interest on their car loans.
To fund all those tax cuts and credits, Trump promised to implement high tariffs on goods entering the U.S., though economists and others question whether the tariff rates he was generally suggesting would cover the cost.
— With reporting by Roger Russell
Credit: Source link
