The upcoming election season has brought attention to the trillions of dollars in expiring tax breaks from the Tax Cuts and Jobs Act of 2017 (TCJA). The fate of these tax provisions could significantly impact the taxes of most Americans after 2025, unless Congress decides to extend them. Both President Joe Biden and former President Donald Trump have addressed the looming 2025 tax cliff and proposed different approaches to handling the situation.
The TCJA brought temporary tax reductions for many Americans by lowering federal income tax brackets, increasing the standard deduction, and enhancing the child tax credit, among other changes. Trump’s plan involves extending all TCJA provisions, while Biden aims to extend tax breaks for individuals earning under the $400,000 threshold – which covers a majority of Americans. Despite their differing approaches, both candidates prioritize providing tax relief for the majority of taxpayers.
The fate of these tax cuts ultimately depends on which party controls Congress in the future. Some of the expiring TCJA provisions include lower federal income tax brackets, which would lead to rate increases if not extended after 2025. Biden’s proposed budget for 2025 includes a 39.6% rate for higher-income individuals. Additionally, the expiration of the higher standard deduction could result in more filers opting to itemize deductions, potentially affecting various tax breaks.
Another significant provision set to expire is the increased child tax credit introduced by the TCJA. Lawmakers have debated expanding this credit further in 2024. Biden has expressed support for an expansion, but there are ongoing discussions regarding the specific details of the credit, such as the amount, eligibility criteria, and refundability. These debates highlight the complexity of tax policy decisions and their potential impacts on American families.
Both Biden and Trump have shown a willingness to impose tariffs on imported goods, particularly from China. While their approaches differ in terms of targeting and rates, the overall impact on consumers remains a concern. Higher tariffs could lead to increased prices for consumers, highlighting the need for careful consideration in trade policy decisions. As the debate continues, it is essential to assess the broader economic implications of tariff implementations.
As the 2025 deadline approaches, there are growing concerns about how to finance the extension of TCJA tax breaks, especially in light of the federal budget deficit. Fully extending these tax provisions could potentially add trillions of dollars to the deficit over the next decade, according to the Congressional Budget Office. Biden’s economic advisor has suggested raising taxes on the ultra-wealthy and corporations to fund extensions for the middle class. These proposals underscore the trade-offs involved in tax policy decisions and the need for a balanced approach to fiscal management.
The expiration of key tax breaks from the TCJA poses significant challenges for policymakers and taxpayers alike. The decisions made in the coming years will have lasting impacts on individual tax bills, government revenue, and the broader economy. As voters evaluate candidates’ tax proposals and priorities, it is crucial to consider the potential consequences of inaction and the trade-offs involved in extending or modifying existing tax provisions. By staying informed and engaged in the debate over tax policy, Americans can contribute to shaping a fairer and more sustainable tax system for the future.