Regardless of who wins November’s election, one thing is a near certainty: the person in the White House must get a major new tax law passed next year, before many parts of the 2017 Trump tax cuts are set to expire.
Given the likelihood that Congress will be split when either Donald Trump or Kamala Harris takes the oath of office next January, it’s plausible that a big tax overhaul becomes one of the few pieces of major legislation to actually pass in either administration’s first year.
It’s why, when the candidates are outlining their tax agendas, voters should pay attention.
“There is no question that tax legislation will be top of mind for Congress and the next president in 2025,” Caroline Bruckner, the managing director of the Kogod Tax Policy Center, told Newsweek. “With the looming expiration of the Trump tax cuts, both parties will have to come together to find a deal or face the voters’ wrath.”
It’s been almost seven years since Trump signed into law one of the most sweeping tax overhauls in decades, officially known as the Tax Cuts and Jobs Act of 2017 (TCJA). By the end of 2025, Congress will have to decide which of the tax cut provisions in the TCJA to keep, end or expand. The $1.5 trillion tax bill included significant tax cuts for both corporations and individuals, although they largely benefitted wealthier Americans and large businesses.
Ahead of November’s election, both candidates have laid out their plans for a tax overhaul.
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Trump’s Tax Plan
If elected, Trump has said he plans to extend his tax cuts and go even further by eliminating taxes on tips and Social Security benefits and by cutting the corporate tax rate again, dropping it from 21 percent to 15 percent. Before the TCJA, the corporate tax rate was 35 percent.
But Joann Weiner, a former senior economist with the U.S. Treasury Department’s Office of Tax Policy, told Newsweek that it’s not clear Congress will go along with his plans for another corporate tax cut. Trump has argued that slashing those taxes would give businesses more money to grow and hire, but the nonpartisan Penn Wharton Budget Model estimates that Trump’s plan would adding $5.8 trillion to the national debt that economists are already worried is growing so big as to become unmanageable.
“What I tell people all the time: The Trump policies were designed to lift middle-class wages, re-onshore and re-industrialize,” Joseph LaVorgna, an economist who worked in the Trump White House, told the Associated Press. “The intention is to get wages higher.”
According to the Penn Wharton Budget Model, an initiative meant to analyze the fiscal impact of public policies, a middle-class household with $80,000 in income would gain $1,700 after taxes under Trump’s plan, while a household with $14 million in income would gain $377,000 under Trump.
Harris’ Tax Plan
Harris, on the other hand, has said she would only leave the Trump-era tax cus in place for Americans earning up to $400,000 per year. She would raise rates for those who earn more, arguing that richer Americans can afford to pay higher taxes that would pay for policies that would help spur the construction of three million homes and tax breaks for parents. She has also embraced Trump’s idea of not taxing tips, despite fiscal experts from both sides of the aisle casting doubt on such a policy.
A middle-class household with $80,000 in income would gain $2,200 after taxes under Harris’ plan, while a household with $14 million in income would lose $167,000 under Harris, according to Penn.
“If Harris wins, the most likely scenario is something like what Obama did — extend the tax cuts for the lowest level but let the high level cuts expire,” Weiner said.
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Weiner said Harris would be unlikely to eliminate the cap on state and local tax (SALT) deductions, which was set to $10,000 under Trump’s tax cuts, and in fact, go further by increasing it. Harris has also floated raising the corporate tax to 28 percent, from 21 percent, which Weiner said would still make the U.S. rate higher than the 25 percent seen in many other industrialized countries.
One of the clearest breaks between Harris and President Joe Biden, whose tax policies her campaign has largely inherited, came Wednesday when the vice president unveiled a lower long-term capital gains tax. Harris told supporters at a New Hampshire rally that she would levy a 28 percent long-term capital gains tax on people making $1 million a year or more. Biden previously called for a 39.6 percent tax rate on capital gains.
Trump has not outlined his position yet, but in 2016, he supported capping capital-gains taxes at 20 percent. The Heritage Foundation’s Project 2025 calls for a 15 percent capital-gains tax.
Who Is Better Poised to Negotiate?
Bruckner said the upshot is that both Trump and Harris have significant and substantive tax legislation experience. She pointed to Trump’s work with former Vice President Mike Pence and congressional republicans to get the TCJA passed in 2017, as well as the time Harris spent presiding over tight Senate votes and working with Biden on the American Rescue Plan and the Inflation Reduction Act.
“It’s important that each of the candidates at the top of the ticket have experience – that could be very useful in finding a path forward in a divided Congress,” Bruckner said. “However, the tax aspects of the looming fight are easy in comparison to the potential budget fights. Whichever party loses is going to fight any tax legislation on budget grounds. Those budget fights can get really technical and be challenging. Whichever candidate has stronger relationships on the Hill will tend to have an easier time navigating those waters.”
She said that one of the most overlooked aspect of the campaign’s tax policies is the differences between Senator JD Vance and Governor Tim Walz.
“An effective vice president can make a huge difference in making deals on the Hill,” Bruckner said.
Walz, who spent more than a decade in Congress working on Obama-era budget packages like the Affordable Care Act, “has significant legislative experience, extensive relationships with members of Congress in both parties, and, as a result, understands how the tax and budget process works in a partisan Congress.”
Vance, on the other hand, joined Congress only two years ago. Not only is he a relatively new officeholder, he’s also served in the minority party of the Senate.
“Practically, that’s not enough time to have developed enough experience to navigate the bruising tax and budget battles that a divided government will present,” Bruckner said.
