Elections Outlook Report - Flipbook - Page 55
Trump Administration Tax Executive Outlook
TCJA Renewal and Corporate Tax Reduction
Reversing IRS Expansion and Funding Increases
Significant provisions of the Tax Cuts and Jobs Act (TCJA), which introduced
$3.3 trillion in tax reductions under Trump’s 2017 law, are set to expire at the
close of 2025. This sets the stage for the next Congress to move a major
tax bill in 2025 that will extend many of these provisions and modify others,
as significant potential tax increases, including a halving of the standard
deduction, an increase in all income tax rates, and a reduction of estate tax
exemption, loom if this bill is not enacted. Trump supports permanently
extending the expiring cuts across all income brackets and adding further
reductions. He may also build on its framework by proposing a further
reduction of the corporate income tax rate from 21% to 15%, but only for
domestic production.
Trump’s priorities include rolling back the $80 billion funding boost
provided to the IRS under the Inflation Reduction Act (IRA), which aims to
strengthen enforcement, customer service, and technology modernization.
He supports Congressional Republicans’ efforts to redirect this funding to
other purposes, thereby curtailing the IRS’s recent growth.
Inflation Reduction Act (IRA)
To offset the cost of extending Tax Cuts and Jobs Act (TCJA) provisions,
GOP lawmakers may push to repeal or reduce some IRA tax credits and
subsidies related to renewable energy, electric vehicles, and energy
efficiency. Some IRA provisions, like the hydrogen, biofuels and carbon
sequestration tax credits, may survive due to industry and bipartisan
support.
SALT and Exemptions
President-Elect Trump has indicated an interest in restoring the unlimited
itemized deduction for state and local taxes (SALT). Additionally, he has
proposed exempting Social Security benefits, tip income, and overtime
pay from income tax. He also aims to introduce a deduction for auto loan
interest and a tax credit to support family caregivers. (As Congress goes
through the difficult process of drafting a tax bill in 2024, we expect most
of these proposals to end up on the cutting room floor.)
Halting IRS Workforce Expansion
In line with recommendations from Project 2025, Trump would aim to
prevent further increases in IRS staffing, potentially reversing the hiring of
over 10,000 employees added under the Biden administration. He views
this hiring freeze as essential to stopping the agency from becoming more
“intrusive” in taxpayers’ lives.
Reducing IRS Enforcement Focus on High-Income Individuals
and Corporations
Trump’s approach would likely involve shifting away from the IRS’s
increased focus on high-income earners and corporations, which was
a priority under Biden to increase revenue collection. This shift would
reflect a broader effort to reduce perceived burdens on individuals and
businesses regarding tax enforcement.
