By Steve Dewey
This Tax Cuts and Jobs Act (TCJA) signed into law by President Donald Trump on December 22, 2017, introduced across-the-board income tax cuts for all income levels, as well as a significant tax break for American taxpayers. However, most of the tax breaks expire on December 31, 2025, resulting in significant tax increases for most Americans in 2026.
Republican presidential candidate Donald Trump and congressional Republicans are calling for modern legislation in 2025 to make the TCJA tax cuts indefinite. However, that will only happen if three election outcomes occur in November: (1) Trump wins the presidential election; (2) Republicans gain a majority in the Senate; and (3) Republicans maintain a majority in the House of Representatives. Failure to win the presidential election and both houses of Congress would be devastating to Americans, given Democrats’ reluctance to extend the TCJA tax cuts.
The mighty Democratic opposition to the TCJA was evident in the votes in Congress for its passage. Not a single Democrat in either of the two Senate or House of Representatives I voted for it. What’s more, both President Biden and the Democratic presidential candidate Kamala Harris expressed opposition to the TCJA and the extension of expiring tax cuts.
Harris’ tax proposals so far are troubling
Harris’ stance on expiring TCJA tax cuts appears to be changing as a modern presidential candidate in 2024. She reportedly favors extending the Trump tax cuts for taxpayers earning less than $100,000 a year. However, she would allow other significant tax breaks under the TCJA to expire. These include the TCJA doubling the standard deduction, significantly reducing the alternative minimum tax, fully expensing short-term capital expenditures, and doubling the estate tax exemption, among other tax changes.
In addition, Harris spoke in favor taxing capital gains and dividends at regular income tax rates, and modern financial transaction taxes with a 0.2% tax on stock transactions and a 0.1% tax on bond transactions. He also supports a modern 4% tax on income above $100,000 to fund the proposed “Medicare for All” program that has been pushed by Senator Bernie Sanders (D-Vermont) and the radical socialist wing of the Democratic Party for the past several years.
A separate concern with Harris’ taxation ideas concerns the corporate income tax. The TCJA lowered the corporate tax rate from 35% to 21% with no sunset date; i.e., the current 21% corporate tax rate is indefinite. However, Harris favors raising the corporate tax rate back to the previous rate of 35%, which would return the U.S. corporate tax rate to one of the highest in the developed world.
Americans will lose in 2026 if Republicans do not win in 2024.
Whatever changes incoming President Harris proposes, Tax Foundation estimated the impact on American taxpayers without any modern tax legislation and the expiration of the TCJA tax cuts at the end of 2025. The following map of congressional districts, produced by the Tax Foundation, shows that income taxes would escalate for taxpayers in every congressional district in the United States in 2026 if the TCJA tax cuts expire as scheduled:
At the end of 2025, all individual tax provisions in the TCJA will expire simultaneously. Without action by Congress, most taxpayers will see a significant tax escalate compared to current policy in 2026.
At the end of 2025, all individual tax provisions in the TCJA will expire simultaneously. Without action by Congress, most taxpayers will see a significant tax escalate compared to current policy in 2026.
Explore the impact by congressional district: https://t.co/i7RRZgmntu photo:twitter.com/DkflSTmzrG
— Tax Foundation (@TaxFoundation) August 15, 2024
Tax increases due to the expiration of the TCJA will vary across the United States, primarily due to the TCJA’s state and local tax (SALT) deductions. The expiration of the SALT deduction will have the greatest impact on taxpayers in jurisdictions with higher state and local tax rates. Across all congressional districts, the average tax escalate for each taxpayer is estimated by the Tax Foundation to be about $2,853 compared to the current TCJA tax law.
The Tax Foundation also estimated the impact of making the TCJA indefinite. In that case, making the TCJA indefinite would create about 904,000 full-time equivalent jobs in 2026. The resulting job growth would not otherwise occur if the TCJA had expired as scheduled or had not become indefinite.
The expiration of the TCJA provisions would also have an impact on overall economic growth. The Tax Foundation estimates that making the TCJA tax provisions indefinite and canceling the scheduled tax increases associated with the TCJA would raise long-term GDP by about 1.1 percent per year and escalate wages by about 0.3 percent per year.
For the average American who wants to avoid significantly higher income taxes in 2026 and the prospect of greater economic prosperity in the years to come, there is a very clear choice in the upcoming November 5 election. The only rational choice is to vote to achieve a landslide Republican presidential victory, majority control of the Senate, and majority control of the House of Representatives. Anything less will guarantee Democrats enough power not only to block and prevent the extension of the TCJA tax cuts and tax breaks, but also the possibility of modern taxes on individuals and businesses and a higher corporate tax rate.
– – –
Steve Dewey is a retired federal financial regulator and CEO Bastiat Society from Washington, DC. He is also the founder Geofinancial TrendsLimited Liability Companyand writes on Sub-base.
Photo “Paperwork” by Tima Miroshnichenko.
