Trump on tax: Introduction
On November 5, former President Donald J. Trump was elected as the 47th President of the United States, with the Republican Party securing control of the Senate.
However, the political control of the House of Representatives remains uncertain and may take a few more days to resolve.
Despite the uncertainty, Republicans are optimistic about achieving a unified government, which could significantly influence tax policy and legislative outcomes.
Unified vs. Split Government: Implications for Tax Policy
Republican Control of Both Chambers
Should Republicans gain control of both the House and Senate, this unified government would provide a pathway for President Trump’s tax proposals to advance.
Leveraging “budget reconciliation” procedures—similar to those used during the passage of the Tax Cuts and Jobs Act of 2017 (TCJA) and the Inflation Reduction Act of 2022 (IRA)—Republicans could bypass some procedural hurdles to enact tax changes with a simple majority.
However, these procedures are limited in scope and application, influencing the extent of legislative changes.
Democratic Control of the House
If Democrats retain control of the House, President Trump’s tax agenda would likely face significant opposition, necessitating bipartisan compromises.
Such a split government may hinder the resolution of crucial tax policy issues, including the looming expiration of TCJA provisions in 2025.
A partisan stalemate could delay decisions, impacting individuals, businesses, and the federal deficit.
Key Tax Proposals Under President Trump’s Administration
General
While President Trump has not released a formal tax plan for his 2024 campaign, he has proposed several tax policy ideas that may shape his administration’s agenda. Below are key highlights:
Corporate Tax Rate and Tariffs
President Trump has suggested reducing the corporate tax rate from 21% to 20%, with an additional reduction to 15% for domestic manufacturing through a revived domestic production activities deduction (DPAD).
While these measures aim to incentivize domestic production and boost mergers and acquisitions (M&A), his aggressive tariff policies could introduce supply chain risks, creating both opportunities and challenges for multinational corporations.
Potential Repeal of the IRA
Certain Republicans advocate for repealing the corporate alternative minimum tax (CAMT) and the stock repurchase excise tax, as well as eliminating clean energy tax credits introduced under the IRA.
Although this could alleviate tax burdens for businesses, it may increase the federal deficit.
Additionally, the repeal could affect the supplemental funding provided to the Internal Revenue Service (IRS) for compliance, modernization, and customer service improvements.
Carried Interest Reforms
President Trump has previously called for the elimination of carried interest deductions, although the TCJA only extended holding periods for long-term capital gains.
Whether this proposal will be revived remains uncertain, but it could serve as a funding source for other tax initiatives.
Vice President-Elect J.D. Vance’s Proposals
J.D. Vance has supported legislation to limit beneficial tax treatment of large corporate mergers, which could create tension with President Trump’s deregulation priorities.
These proposals may serve as bipartisan funding sources to offset other tax cuts.
TCJA-Related Extensions and Modifications
Businesses
President Trump has discussed reinstating 100% bonus depreciation, reversing the TCJA phase-out schedule.
Proposals to eliminate the amortization requirement for R&D expenditures under Section 174 and restore the EBITDA-based business interest deduction are also on the table.
International Provisions
Modifications to global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII), and the base erosion anti-abuse tax (BEAT) are expected.
President Trump has also raised the possibility of withdrawing the U.S. from the OECD’s global tax framework, which could disrupt international tax planning and compliance but may enhance the U.S.’s appeal as an investment destination.
Individuals
The administration aims to make individual TCJA provisions permanent while eliminating the $10,000 cap on state and local tax deductions.
Additionally, proposals to exempt Social Security payments, tips, and overtime income from federal taxation have been discussed.
Trump on Tax: Conclusion
The outcome of the 2024 elections and the composition of Congress will significantly influence the direction of U.S. tax policy over the coming years.
Whether through unified Republican control or bipartisan compromises, the potential changes will impact individuals, businesses, and international tax planning.
Final Thoughts
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