President-elect Donald Trump and his Republican party clarified one aspect of the uncertainty surrounding taxes with a resounding victory in the election.
That means that the many expiring provisions of the Tax Cuts and Jobs Act of 2017 — which Trump signed into law in his first term — are much more likely to remain in force after their potential sunset date at the end of next year. Financial advisors and tax professionals can act without worrying that the rules will shift underneath them to favor much higher income duties.
However, the result also presents Trump and incoming Senate Majority Leader John Thune of South Dakota and House Speaker Mike Johnson of Louisiana with a series of thorny tax policy questions that have tricky, time-sensitive implications, according to Anna Taylor,
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Considering the fact that
"They're going to have to pick their budget number on the front end," Taylor said. "They're going to have to pick that number and put it in the budget resolution, and then they'll kind of back into their policy so that their policies will fit within their budget constraints. And once you get into that process, you can do a lot in the tax base, but there are still limits. I mean, you can't do anything that affects the Social Security program. So they won't be able to do the president's proposal on getting rid of taxes on Social Security benefits."
Individual House GOP members will exercise their strength in the negotiations as well, and the current limit on
The president-elect and his Congressional allies will have to find the balance amid the "real tension" between members from New York and California and those from low-tax states such as Florida or Texas who will view any increases to the limit as "too much of a giveaway for the wealthy New Yorkers and Californians," he said.
"You will need almost perfect unity — more so in the House than the Senate," Traub said. "This really gives a lot of power, I think, to any small group of House members who decide that they will lie down on the train tracks to block a bill they don't like or to enforce the inclusion of a provision that they really want. I think the place we'll watch the most closely at the get-go is over the SALT cap."
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Estimates of
The Treasury Department could "use their extraordinary measures to get them through a few more months before they actually have to deal with the limit," she said.
"But they're going to have to make a decision," Taylor continued. "Are they going to try to do the debt limit first, maybe roll it into some sort of appropriations deal early in the year? Or are they going to try to do the debt limit with taxes, and then that's going to really force them to move really quickly on taxes? So, I don't know. I don't know that they have an answer to that yet. I'll be really interested to see what they say in terms of how they're going to move that limit, because they're going to have to do that at some point — rather soon, too."
Looking further into the future at the end of next year with
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Both parties have used reconciliation in the wake of the last two presidential elections. A continuing resolution-style patch on a temporary basis would have been more likely with divided government, he said.
"Had that been what the voters called for last Tuesday, I think that the odds of a short-term extension into 2025 would have been a lot higher," Traub said. "I don't think that anybody in the GOP majority right now is thinking about a short-term extension. They are thinking about, 'We have an unusual ability now to use reconciliation to affect major policy changes.'"
