The 2024 Election and Tax Policy

Blog article written by Crowe

Prior to Republicans winning both the executive and legislative branches of government, US tax pundits believed that the debate around the Tax Cuts and Jobs Act of 2017 (TCJA) would dominate conversations in Congress immediately after the inauguration. The recent election results change all that. While the TCJA provisions are still scheduled to expire at the end of 2025 and need to be addressed to avoid a massive tax increase for average Americans, other policy issues will likely take precedence when the new president and Congress take office in January.

Republican control of both chambers of Congress means that reconciliation procedures can be used to address TCJA expiring provisions. One of the main advantages of reconciliation is that it allows legislation to pass the Senate with a simple majority of 51 rather than the 60 votes needed to overcome a filibuster. While specific tax priorities will still be debated, the honeymoon period of a new president and Congress from the same party should accelerate the resolution of TCJA expiring provisions, especially if reconciliation procedures are used.

Last spring, the Congressional Budget Office estimated that extending all TCJA expiring provisions would cost $4.6 trillion. That cost had been seen as a potential obstacle to extending all expiring provisions and enacting other tax cuts. However, Congress could agree to score the tax package in a way that keeps deficits under the reconciliation package low. For instance, the cost of tax legislation is generally scored using a current law baseline, which means that extending expiring tax cuts costs money and adds to the deficit. If, however, Congress can agree to use a current policy baseline, extending expiring provisions would not add to the deficit.

Offsets are another possible way to lower the cost of tax legislation; though, if dynamic scoring is used, the indirect benefits of pro-growth tax cuts would reduce the need for offsets. Increased tariffs and repeal of energy tax incentives enacted by the Inflation Reduction Act could be used as offsets to reduce the cost of the tax package. The recission of IRS funding received under the Inflation Reduction Act could also be used as an offset in reconciliation legislation.

While many tax policy issues have become clearer after the 2024 election, the timing and content of new tax legislation in 2025 remain uncertain. While most TCJA expiring provisions appear likely to be extended, it is unclear whether tax cuts from the campaign trail or other Republican tax priorities will be included in the tax package. To be prepared, taxpayers should work with their tax advisers to review their current tax position to be ready to harness the potential opportunities and mitigate the potential risks of upcoming tax legislation.

Learn more

Rochelle Hodes

+1 (202) 552 8028

rochelle.hodes@crowe.com