Tax Reform Takes Center Stage: What to Expect from Congress
As the new administration prepares to take office, lawmakers are gearing up to tackle a pressing issue: tax reform. With a majority in both the House of Representatives and Senate, Republican lawmakers have the opportunity to pass sweeping tax legislation through the budget reconciliation process. However, agreeing on cuts and spending could prove to be a challenge.
Competing Priorities and Interests
Choosing priorities will be difficult, especially considering the federal budget deficit. Policy experts warn that lawmakers will need to navigate competing interests within their own party, as well as those of their constituents. “This is a lot more complicated than just the reds against the blues,” said Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center.
The Fate of the Tax Cuts and Jobs Act
Enacted in 2017, the Tax Cuts and Jobs Act (TCJA) is a key priority for the next administration. Without action from Congress, trillions of tax breaks from the TCJA will expire after 2025. These include lower tax brackets, higher standard deductions, and a more generous child tax credit, among other provisions.
New Proposals and Ideas
President-elect Donald Trump has proposed several new ideas on the campaign trail, including no tax on tips, ending taxes on Social Security benefits for older adults, and ditching taxes on overtime pay. He has also floated eliminating income taxes, creating an auto loan interest deduction, and lifting the cap on the federal deduction for state and local taxes. Additionally, Trump has pushed for universal tariffs on imported goods.
The Road Ahead
Policy experts predict that the Republican tax bill could take months to pass, given the multiple steps involved in the budget reconciliation process. Furthermore, Congress has until December 20 to fund the government and avoid a shutdown, which could take time away from Trump’s tax priorities. “The idea that they’re going to do this in 100 days, I think, is foolish,” Gleckman said.
Timing and Predictions
While some policy experts predict that the bill could get through by October 1, 2025, which closes the federal government’s fiscal year, others are more skeptical. “My over-under is December 31, 2025, and that might be optimistic,” Gleckman said.
As lawmakers navigate the complex landscape of tax reform, one thing is certain: the next few months will be crucial in shaping the future of taxation in the United States.
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