As Republicans gather in Milwaukee this week for the Republican National Convention, the details in the
The main section of the platform pertaining to taxes says, "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. We will eliminate Taxes on Tips for millions of Restaurant and Hospitality Workers, and pursue additional Tax Cuts."
There was more
"The reality is that tax will be front and center next year," said Jonathan Traub, Washington national tax leader and managing principal at Deloitte Tax LLP, who spoke with Accounting Today earlier this month. "It just has to be. It's going to start out with a debate on the debt ceiling, which will set the tone for thoughts around the appetite of the new Congress, whoever the President is, to tolerate additional deficit spending or deficit-financed tax cuts, or whether they will tolerate them at all or not."
The TCJA slashed the top corporate tax rate from 35% to 21% in 2017, and Republicans would like to reduce it more modestly to 20%. The current 21% rate is supposed to be "permanent" and doesn't need to be extended. The focus will likely be more on the expiring provisions related to individuals and pass-through businesses. There will also be renewed attention on the $10,000 limit on state and local tax deductions, especially from Republicans elected in states where taxes are high.
"The individual stuff is scheduled to expire next year, as are a few corporate pieces around international tax," said Traub. "The corporate rate of 21% is theoretically permanent, but it's only permanent until Congress enacts a law to change that. There's no prohibition on Congress changing the law. You also have expiring next year some things that aren't part of the Tax Cuts and Jobs Act, like premium credits for Affordable Care Act beneficiaries. The New Markets Tax Credit expires next year."
Congress will need to deal with those provisions, and balance them against the ever-growing national debt.
"It is just a huge confluence of tax deadlines crashing out of Congress," said Traub. "If you want to extend all those policies, you're talking $4 or $5 trillion."
The RNC platform includes a section about how tariffs will help pay for further tax cuts: "Our Trade deficit in goods has grown to over $1 Trillion Dollars a year. Republicans will support baseline Tariffs on Foreign-made goods, pass the Trump Reciprocal Trade Act, and respond to unfair Trading practices. As Tariffs on Foreign Producers go up, Taxes on American Workers, Families, and Businesses can come down."
However, to pay for all those tax cuts, some tax increases may be necessary, even if they come from tariffs.
"I think we're going to see Republicans raise revenue from corporations in ways we haven't seen historically that are not just tariffs," said Traub. "I think the tariff idea may play well, but it's unclear if the economics behind it are sustainable if you want to use them as a long-term revenue source."
The platform also calls for
But that could encourage employers to pay lower salaries and wages to their restaurant workers and delivery people.
"There are a lot of unanswered questions in that proposal," said Traub. "I can see the political appeal of it. I think there are a lot of questions about how it works as a policy matter. I don't know how you get around individuals trying to game that system to avoid tax."
