Trump Tax Cuts Debate Reaches Deadline for Both Republicans and Democrats

Republicans are hoping an election sweep of Congress and the White House will let them extend former President Donald Trump’s 2017 tax cuts law due to expire next year.

The issue is on the agenda for both sides of the aisle, The Hill reported.

“Republicans of course want to extend all of it, a lot of Democrats want to extend a lot of it,” Steve Wamhoff, policy director at the Washington think tank Institute on Taxation and Economic Policy, told The Hill.

“There’s certainly pressure that if Congress doesn’t do something, some people are going to have tax increases, and there’s always this idea that tax increases are bad.”

Democrats, who opposed the law when Trump was in power, support extending certain cuts like the decreased tax rates for people making less than $400,000 a year.

Republicans, who hold the House and have a favorable Senate map, likely have the best odds at extending all the cuts — but even a divided government would likely deal with the expiring tax cuts rather than have the tax code revert back to its 2017 levels, The Hill reported.

While a lower corporate tax rate was permanently locked in, the individual provisions in the Trump tax law expiring at the end of 2025 means:

* Married couples making the median household income of $74,580 will once again pay 15% of their income in tax instead of 12%.

* Income tax rates for top earners will bump up to 39.6% from 37%.

* The standard deduction will drop to $6,500 from $12,000 for individual filers and to $13,000 from $24,000 for couples.

* The $10,000 cap on state and local taxes will go away, along with a 20% deduction for pass-through businesses income.

Republicans introduced a bill to make the 2017 cuts permanent when they retook the House in February last year. But critics of Republicans’ 2023 bill to extend tax cuts say its savings are skewed toward the wealthiest Americans, The Hill noted.

“The bill would cost $288.5 billion in 2026 alone,” analysts for the ITEP wrote in a 2023 commentary, The Hill reported. “In 2026, the poorest fifth of Americans would receive just 1 percent of that total while the richest fifth of Americans would receive nearly two-thirds of that total.”

Trump has yet to provide a detailed tax plan as part of his campaign, but has proposed an across-the-board 10% tariff on imported goods, The Hill reported.

President Joe Biden has proposed extending the Trump tax cuts for people making less than $400,000 a year, describing the expirations in the 2017 law as “problematic.”

Meanwhile, deficit storm clouds are darkening over the fiscal horizon.

“The U.S. does face some constraints,” Charles Dallara, a former executive director of the IMF and assistant Treasury secretary, told The Hill. “Eventually those constraints will either be recognized sensibly by our political leadership or they’ll be recognized in a more disruptive fashion probably by the markets.”