What do the election results mean for Republicans' ability to advance their tax agenda?
We know there will probably be a Republican president and it seems that the Republican Party could have the bulk each chambers of Congress. That means Republicans will give you the option to pass a tax bill along party lines, much like how Democrats passed the Inflation Reduction Act using budget reconciliation.
This would allow Republicans to pass major policies with an easy majority. The Republican majority is narrow, so it would be interesting to see how leaders unite their constituencies.
Republicans have traditionally supported lower tax rates for businesses and individuals and tax incentives to stimulate economic activity.
What's next for the Tax Cuts and Jobs Act?
The law currently expires at the top of 2025, but Trump and Republicans support renewing a lot of its provisions.
The nonpartisan Congressional Budget Office estimated in May 2024 that extending the law would cost the federal government $4.6 trillionand there’s a split inside the party, with one bloc of Republican congressmen calling for a full extension and one other calling for a balance between tax policy and annual federal deficits.
Republicans will likely fight to keep up key components including the upper standard deduction, lower corporate tax rates, individual tax rate cuts and an increased estate tax exemption.
There is even talk of further reducing the company tax rate, possibly to fifteen% for domestic production, which can be a big step.
What other tax measures are Republicans considering?
Trump mentioned quite a lot of tax relief ideas in the course of the campaign, including exempting suggestions, Social Security advantages and time beyond regulation pay from income taxes and creating an itemized deduction for automobile loan interest.
However, Republicans don’t completely agree on tax policy. Some deficit advocates are concerned about lost revenue, so there could possibly be internal resistance on all of those issues. The real query is whether or not there will probably be enough resistance inside the party to alter or block certain proposals.
But I expect that many parts of the law will probably be renewed and we might even see some additions. For example, there was strong pressure to extend the cap on state and native tax deductions, also generally known as SALT, which has bipartisan support in states with higher state income taxes akin to New York, California and Illinois. It will probably be interesting to see if this catches on. There is great pressure from each Republicans and Democrats to realize relief on this area.
Where will they find revenue?
Good query. Observers suggest Republicans will likely consider removing green energy subsidies from the 2022 Inflation Reduction Act. These could possibly be eliminated to offset the prices of their recent tax proposals.
Another area to observe is tariffs. There is talk of accelerating tariffs on Chinese goods – potentially as much as 60% – and even imposing a universal tariff on all US imports at a rate of 20%. It will probably be interesting to see how this plays out. Will or not it’s more targeted? For example, will there proceed to be tariffs on select imports, akin to automobile imports from China, to guard the U.S. electric vehicle market?
What will you see between now and tax day?
One factor will probably be Trump's cabinet appointments. Whoever he nominates for finance minister, for instance, could have plenty of influence. You may help shape what the tax bill looks like. Another key factor will probably be who finally ends up on Congress' tax committees. The composition of key committees will impact policy direction and specific details.
What do you’re thinking that will occur with tariffs?
Tariffs are unpredictable: they could possibly be applied more broadly or more selectively. It could possibly be much like how Trump and his first administration imposed tariffs on steel, aluminum and solar panels. Interestingly, most of the tariffs were retained by the Biden administration.
Blanket tariffs could slow the economy, so there’s all the time a risk. Tariffs affect inflation because they affect the price of imported goods, which might likely reduce consumer purchasing power. Domestic pressure will play a job, as higher tariffs could drive up prices for a lot of imported goods, including essential products like medicines.
Do you will have any advice for people struggling to maintain up with the most recent tax news?
Observers often take every policy proposal within the campaign literally—from tip exemptions, Social Security advantages, time beyond regulation pay, etc.—as if all of those proposals were adopted exactly as they were presented. But the main points matter, and policies are rarely implemented without adjustments. Therefore, it’s advisable to read beyond the headlines.
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