The Tax Cuts and Jobs Act (TCJA), enacted under the Trump administration in 2017, significantly reshaped the United States tax landscape.
However, as President Joe Biden seeks reelection, he has vowed to let these tax cuts expire, setting the stage for a potential showdown over the future of the nation’s fiscal policy.
“If Biden is re-elected and the Trump tax cuts go away, that’s a 20 percent increase in taxes,” said Steube on Fox Businesses The Evening Edit. “Right now, small businesses pay about 21 percent in taxes to the federal government. If the Trump tax cuts go away, you’re talking about 43 percent. It’s a 20 percent increase in their taxes up to 43 percent.”
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“We had hearings in the committee where we had business people that came and said if those tax cuts expire they will be forced to fire their Workforce, they won’t be able to expand their businesses, which means less jobs, less money to American families. On top of that Biden wants to increase taxes by seven trillion dollars,” said Steube.
The TCJA, often referred to as the “Trump tax cuts,” was a sweeping overhaul of the U.S. tax code. It reduced the top individual income tax rate from 39.6% to 37%, nearly doubled the standard deduction, and lowered the corporate tax rate from 35% to 21%.
Proponents of the law argued that these changes would spur economic growth, boost investment, and provide much-needed relief for American taxpayers.
Supporters of the law contend that it has indeed delivered on its promises, citing increased business investment, job creation, and a stronger economy.
However, critics argue that the benefits have been disproportionately skewed towards the wealthy and that the law has contributed to rising budget deficits.
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“This talking point from the left that this is just ‘helping the rich’ is a complete lie to the American people. People rely upon their jobs in these businesses,” said Steube.
A critical aspect of the TCJA is that many of its provisions are set to expire at the end of 2025. This means that unless Congress acts to extend or make these tax cuts permanent, millions of Americans could face higher tax bills in the coming years.
During his campaign and now as president, Joe Biden has made it clear that he intends to let the TCJA expire if he is reelected. This stance has drawn criticism from Republicans and some moderate Democrats, who argue that allowing the tax cuts to lapse would be detrimental to the economy and middle-class families.
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If the TCJA is allowed to expire, the implications could be far-reaching. According to estimates, the average American family of four making $75,000 could see their tax burden increase by $1,500.
Small businesses would also face a higher tax rate, potentially impacting their competitiveness and profitability. Additionally, the expiration of the cap on state and local tax (SALT) deductions could provide a significant tax break for high-income earners in certain states.
Biden’s justification for letting the tax cuts expire centers on his belief that the law disproportionately benefited the wealthy and corporations while doing little to support the middle class.
However, critics argue that this stance contradicts his campaign promise not to raise taxes on those earning less than $400,000 per year.
The expiration of the TCJA would mean that many taxpayers, including those in the middle class, would face higher tax bills. This could put additional financial pressure on families already grappling with the rising cost of living.
The Debate Surrounding the SALT Deduction Cap
One of the more contentious aspects of the TCJA was the $10,000 cap on the state and local tax (SALT) deduction. This provision has been a source of controversy, particularly in high-tax states.
The SALT Deduction Debate
Proponents of the SALT deduction cap argue that it helps to limit the extent to which the federal government subsidizes state and local tax policies, while critics contend that it unfairly penalizes taxpayers in certain regions.
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The Expiration of the SALT Cap
The SALT deduction cap is also set to expire in 2025, potentially providing a significant tax break for high-income earners in high-tax states. This dynamic has added another layer of complexity to the ongoing debate over the TCJA’s future.
The Role of Congress and the Legislative Process
Ultimately, the fate of the TCJA will be determined by the actions of Congress. Both the House and the Senate will play a crucial role in shaping the future of the tax code.
The Legislative Landscape
As the 2024 election approaches, the balance of power in Congress will be a critical factor in determining the path forward. The ability of either party to enact their preferred tax policies will depend on the composition of the legislative branch.
The Potential for Compromise
Given the partisan divide on this issue, the possibility of a bipartisan compromise that could extend or modify the TCJA’s provisions cannot be ruled out. However, the political landscape and the divergent priorities of the two parties may make such an outcome challenging to achieve.
The debate over the TCJA’s future extends beyond the immediate impact on taxpayers and the economy. It also raises broader questions about the direction of U.S. tax policy and the role of government in shaping the country’s fiscal landscape.
The outcome of the TCJA debate will have implications for the future of tax policy in the United States. It could influence the priorities and approaches of policymakers, as well as the public’s perceptions of the tax system and the government’s role in managing the economy.
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