Trump, Harris tout different visions for tax policy

August 22, 2024 10:00 AM

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Since President Joe Biden announced his decision not to seek reelection, the race to the White House has heated up, pushing tax practitioners to scrutinize the legislative track records of both candidates in the hopes of understanding what each potential administration could mean to the accounting profession at large.

Former U.S. President Donald Trump has touted changes for a second term ranging from removing taxes on Social Security payments to lowering the corporate tax rate to 20% in the hopes of building support among senior voters and executives of some of the largest companies in the country.

Trump's administration was successful in passing the landmark Tax Cuts and Jobs Act of 2017 during his time in office, bringing about a reduced number of tax brackets, an increase in the Child Tax Credit and a new family tax credit, among other revisions. This drove overseas investment activity among U.S.-based multinational entities up by roughly 14%.

"Republicans will make permanent the provisions of the Trump Tax Cuts and Jobs Act that doubled the standard deduction, expanded the Child Tax Credit, and spurred economic growth for all Americans," as stated in the Republican party platform.

The platform goes on to additionally call for eliminating taxes on tips earned by restaurant and hospitality workers, as well as further cuts elsewhere.

Sunil Kansal, head of consulting and valuation services at the London-based Shasat Consulting, said the focus under a Trump administration "could shift towards maximizing benefits from deregulation and tax cuts."

"Here, accountants should focus on optimizing tax strategies and staying updated on potential shifts in trade policy that could impact international transactions," Kansal said.

While Harris and Trump have aligned on ending taxes on tips, there have been few other overlaps between the two candidates' policy priorities.

From her time as a state attorney general, California senator and in the White House, Harris has backed numerous efforts largely focused on those who make less than $100,000 per year. Examples include LIFT (Livable Incomes for Families Today — the Middle Class Act bill she proposed in 2018), the Rent Relief Act, her "Medicare for All" plan and more.

The impact that increasing the refundability of the Child Tax Credit had on her proposed refundable tax credit could be a major part of Harris' platform, said Caroline Bruckner, tax professor at American University's Kogod School of Business and chief counsel for the U.S. Senate Committee on Small Business and Entrepreneurship, in an interview with Accounting Today's Roger Russell.

"The Child Tax Credit is a real opportunity for her to tout the success of the refundable tax credit," Bruckner said. "It was an essential part of her tax proposal in 2019, and the Biden administration was actually able to do that with the credit. There was a bipartisan proposal just sitting there that was passed by the House earlier this year which would have expanded the credit."

Below are in-depth looks at the potential impact of the upcoming presidential election on the accounting profession, and predictions on what each candidate's administration will bring to the table.

Harris’ legislative past hints at future tax policy stance

Accountants and tax professionals hoping to surmise Kamala Harris' tax policy positions have been looking to her past legislative efforts to better predict what her administration could yield if elected to the White House.

"People are looking at what she did while she was in the Senate, and on the campaign trail in 2019 and in 2020," Professor Bruckner told Accounting Today's Roger Russell this month.

Harris has historically focused on providing tax relief to those making less than $100,000 per year, as seen through the LIFT (Livable Incomes for Families Today), the Middle Class Act bill she proposed in 2018. The legislation would have provided up to $3,000 in tax credits for those filing as individuals and $6,000 to those filing as joint taxpayers, provided their income was less than $100,000.

During her time as vice president under the Biden administration, Harris has backed notable efforts like the Inflation Reduction Act of 2022 and the Greenbook budget proposals.

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Harris' tax policy positions begin to take shape

Could the November election further cut IRS funding?

The Internal Revenue Service received an $80 billion boost in funding under the Inflation Reduction Act passed in 2022, but roughly a quarter of the full amount has since been pulled back — leaving many to wonder how that number will change depending on the outcome of the November presidential election.

When the bill became law, Democrats were in control of both chambers of Congress and the White House. That changed when Republicans won control of the House last year.

Rochelle Hodes, principal in the Washington National Tax Office at Crowe, told Accounting Today last month that while Democrats view the IRS's IRA funding as separate from the agency's annual appropriations, Republicans view IRS funding more holistically and have attempted to reduce total agency funding by reducing both IRA funding and IRS appropriations.

"Even if IRS funding survives the fiscal year 2025 congressional budget process relatively unscathed … the fiscal year 2026 budget process begins in February 2025, which gives Congress another opportunity to address IRS funding during the height of discussions about how to address expiring provisions enacted by the Tax Cuts and Jobs Act of 2017," Hodes said.

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The effect of the November election on IRS funding

Tax experts weigh in on presidential election woes facing clients

The presidential election is fast approaching, and clients' concerns surrounding everything from inflation to expiring tax laws are mounting.

"Many uncertainties regarding the direction of the U.S. economy, the current inflationary environment along with rising interest rates, prices and labor shortages all contribute," Mark Baran, managing director at CBIZ MHM's National Tax Office in Washington, D.C., told Accounting Today last month. "Clients are paying close attention to how each candidate would change the Tax Code."

For professionals specifically, administrative changes related to the renewable energy credits under the Inflation Reduction Act and federal corporate tax rates are top-of-mind priorities to keep a watchful eye on for the future administration.

Experts are keen to remind clients that regardless of which candidate sits in the White House after November has come and gone, legislation is not always a sure thing.

"Politicians can say anything they want to get elected [but] tax laws are written by Congress and Congress needs to pass these bills before the president can sign them into law … Even members of the same party don't agree with each other," Larry Pon, a CPA in Redwood City, California, said in an interview with Accounting Today.

Read more:

The road to November: What tax pros' clients think about the election

Project 2025’s blueprint for the wealth management industry

The 922-page plan drafted by the Heritage Foundation for Donald Trump's possible return to office known as Project 2025 calls for widespread revisions to individual income taxes, ERISA guidelines at the Department of Labor, the operations of the Securities and Exchange Commission and much more.

Many have associated the Trump candidacy with Project 2025, despite statements by the former president decrying parts of the document as "absolutely ridiculous and abysmal."

In the document's chapter on the SEC, author David R. Burton posits that both the Public Company Accounting Oversight Board and the Financial Industry Regulatory

Authority have "proved to be ineffective, costly, opaque and largely impervious to reform," further calling for both organizations to be dissolved and their regulatory responsibilities taken on by the SEC.

"Furthermore, Congress should establish an independent board or commission and charge it with producing a detailed report within 18 months that examines the degree to which the regulatory functions of the various other so-called self-regulatory organizations, which are no longer self-regulatory in any meaningful sense, should be moved to the SEC," stated Burton, who is a senior fellow in economic policy at The Heritage Foundation.

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Project 2025 goals would transform wealth management landscape

How accountants feel about the 2024 election post-tax season

With tax season in the rearview mirror, professionals have set their sights on the election between Harris and Trump.

Research conducted by Accounting Today found that a plurality of industry experts (regardless of individual choice for this year's specific presidential candidates) felt Republican control of the White House, Senate and House of Representatives would yield the best outcome for the industry at 42%, 47% and 46% respectively.

Top concerns for the next administration to address centered around the economy, the national debt and tax reform, while regulation of technology, small-business investment and industry regulations and compliance burdens were the least urgent.

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Accountants and the 2024 election