Tax Outlook Series: The GOP Plan
July 2, 2024
Tax policy will be a key issue heading into 2025, and we are examining different election outcomes and their impact on taxes. This week, we take a deep dive into President Trump’s and Republicans’ various proposals on taxes.
- Click here for the first article in a series analyzing election scenarios’ and their impact on tax policy and click here for the second article on Biden’s tax proposals.
The big picture: According to the Tax Foundation, a Trump administration would:
- Impose a universal baseline tariff on all U.S. imports,
- Impose a 60% tariff on all U.S. imports from China,
- Make the individual and estate tax cuts of the TCJA permanent, lower the corporate income tax rate from 21% to 20%,
- Tax large private university endowments, and
- Consider replacing the income tax with tariffs.
Trump has touted the 2017 Tax Cuts and Job Act (TCJA) as spurring growth while cutting taxes for the middle class and businesses. With several key provisions of the TCJA expiring after 2025, a Republican government is expected to largely reauthorize the law.
- As we have covered previously, the expiring state and local tax (SALT) deduction limitation capped at $10,000, is expected to receive significant pushback from Blue-state Republicans.
- With a narrow governing majority, GOP leadership may have to cut a deal with key members, as it is unlikely Democrats will support any GOP-only tax bill. A significantly higher SALT cap could be a likely outcome.
Tariffs have recently become a key feature of Trump’s tax plan, with Trump himself floating the idea of eliminating income taxes in favor of universal tariffs. Critics of the plan have said the plan will upend the progressive tax system by raising taxes on lower-income individuals.
The bipartisan Smith-Wyden tax bill, now languishing in the Senate, could also demonstrate potential opportunities and schisms in the parties. The bill includes a:
- Reintroduction of the child tax credit, which is a key priority for Democrats and even some populist Republicans, and
- Fixes to the research and development tax treatment, long sought by many Republicans.
What they’re saying: Meanwhile, House Republicans have established “tax teams” led by members of the Ways and Means Committee to gather feedback and develop plans for the next Congress.
The committee is accepting public comments on tax policy. The subject-matter areas are as follows:
- American Manufacturing
- Working Families
- American Workforce
- Main Street
- New Economy
- Rural America
- Community Development
- Supply Chains
- U.S. Innovation
- Global Competitiveness
The bottom line: While GOP lawmakers will craft a tax plan that is ready to go in January, the election outcomes and margins will be the final arbiter of what the package covers and how it is addressed. Additionally, a re-elected President Trump could throw a wrench into swift action if he changes course on a particular rate (e.g., the corporate rate at 15% versus 20%).
Contact David McCarthy (dmccarthy@crefc.org) with questions.