Friday, June 21, 2024

Experts Eye Tax Changes Ahead of Trump-era Cuts’ Sunset

Photo by Towfiqu barbhuiya on Unsplash

WASHINGTON — The race to harness the tax code is in full swing as economists and advocates across the political spectrum view the expiring Trump-era tax law as an opportunity to advance their economic priorities.

Democratic Rep. Suzan DelBene of Washington said Wednesday that reworking the tax code will be “a reflection of what your values are.”

DelBene, who sits on the U.S. House Committee on Ways and Means Subcommittee on Tax Policy, said her priorities include modernizing the tax code, raising revenue via carbon fees on imported goods, and making permanent an expanded child tax credit akin to the temporary changes in place during the pandemic.

“The top line is starting from what our values and goals are, and then looking at what the policies are that help us get there,” DelBene said at a Politico-sponsored discussion on proposed tax law changes.

The early morning event at Washington’s Union Station brought together tax experts and advocates from Georgetown University Law Center, the Urban Institute, the Heritage Foundation and Groundwork Collaborative.

Tax overhaul

The massive tax overhaul ushered in under the Trump administration permanently cut the corporate tax rate to 21% from 35%. The 2017 law, championed by Republicans as the Tax Cuts and Jobs Act, also put in place several temporary measures for corporations and small businesses. Some are phasing out or already expired, including immediate deductions for certain investments.

Temporary changes for households included marginal tax rate cuts across the board, a doubling of the child tax credit, and a near doubling of the standard deduction — all of which are set to expire Dec. 31, 2025.

A bipartisan bill to temporarily extend the expiring business incentives and expand the child tax credit beyond 2025 sailed through the U.S. House in late January, but has been stalled by U.S. Senate Republicans who oppose some of the child tax credit expansion proposals.

A May 2024 nonpartisan Congressional Budget Office report estimated extending the tax cuts would cost roughly $4.6 trillion over 10 years. The bulk of the cost would stem from keeping in place individual tax cuts, according to an analysis of the report by the Bipartisan Policy Center.

Critics of the 2017 law point to a recent March analysis from academics and members of the Joint Committee on Taxation and the Federal Reserve that shows that the law’s benefits flowed to the highest earners.

DelBene said revisiting the corporate tax rate, even on the Republican side, is “on the table” and lawmakers will be talking about “where the TCJA wasn’t about investing and making sure that we were being fiscally responsible.”

‘Incredibly bullish’

Lindsay Owens, executive director of the Groundwork Collaborative, said Wednesday she’s “incredibly bullish” on elected officials making “fundamental changes” to the tax code next year.

The progressive think tank sent a letter Wednesday to House and Senate leadership and top tax writers urging them “to use the expiration of these provisions as an opportunity to address long-standing problems with our tax code, not just to tinker around the edges.”

The letter was signed by 100 organizations from across the U.S., ranging from the AFL-CIO and the United Auto Workers to the National Women’s Law Center and United Church of Christ.

Stephen Moore, who helped write the Trump-era tax law and is now the conservative Heritage Foundation’s senior visiting fellow in economics, said the 2017 law was a “huge success” and that “we’re gonna definitely make those tax cuts permanent.”

Moore is an economic adviser for former President Donald Trump’s reelection effort, but said he was not speaking on behalf of the presidential campaign.

He said he does not agree with Trump on everything, including a promise to enact 10% tariffs on imported goods, reaching as high as 60% on Chinese imports.

“A tariff is just a consumption tax,” he said. “And so you know, I think that it is not a great policy, in my opinion. But if you’re gonna have a tariff, I would rather have a tariff that is uniform than trying to have, like, a protectionist tariff to, you know, protect this industry or that industry.”

When pressed on data that shows funding the Internal Revenue Service increases revenue, Moore said that President Joe Biden’s increase in funding for the agency is “diabolical.”

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