The 2024 election is shaping up to be a pivotal moment for the 2017 Trump tax cuts. Republicans, hoping for a sweep of Congress and the White House, aim to extend the former president’s signature law. Democrats, on the other hand, have supported extending certain cuts, such as the decreased tax rates for people making less than $400,000 a year, but oppose a blanket extension, which would cost nearly $4 trillion over the next decade. (source)
President Biden has supported increasing the corporate tax rate to 28 percent from Trump’s level of 21 percent. He aims to raise taxes on the wealthy to reduce the deficit by between $3 trillion and $4 trillion over 10 years. A sweep of the White House and Congress would put either party in a better position to accomplish its aims through tackling the cuts with a budget reconciliation measure, a way of getting around the Senate’s 60-vote filibuster.
Without extensions, the individual provisions in the Trump tax law will expire at the end of 2025. This would mean that married couples making the U.S. median household income of $74,580 will once again pay 15 percent of their income in tax instead of 12 percent. Income tax rates for top earners will bump up to 39.6 percent from 37 percent. 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-percent deduction for pass-through businesses income.
Republicans introduced a bill to make the 2017 cuts permanent almost as soon as they retook the House in February last year. They say the work to extend the Trump tax cuts has already begun and that there are numerous points of agreement with Democrats. However, critics of Republicans’ 2023 bill to extend tax cuts say its savings are skewed toward the wealthiest Americans.
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.” His 2024 budget says America should “[pay] for the continuation of tax cuts for people earning less than $400,000 in a fiscally responsible manner and address the problematic sunsets created by President Trump and congressional Republicans.”
As lawmakers consider whether to extend the Trump tax cuts, and whether to expand the child tax credit and reinstitute business deductions that were initially meant to help pay for those cuts, deficit storm clouds are only darkening over the U.S. fiscal horizon. Experts say these clouds can sneak up on markets at unexpected moments, leading to potential financial instability.
As we approach the 2024 election, it’s clear that the fate of the 2017 Trump tax cuts hangs in the balance. The outcome will have significant implications for the U.S. economy and the financial responsibilities of its citizens. Stay informed and make your voice heard.