Wed. May 29th, 2024

Biden vs. GOP: Tax fight heats up ahead of election

Alex Thompson By Alex Thompson May21,2024

Rhetoric is heating up on competing visions for taxes from Democrats and Republicans ahead of the 2024 election, which will determine whether the individual provisions in the 2017 Trump tax cuts are extended, modified or thrown into the legislative dust bin.

President Biden, lawmakers on key tax writing committees, and tax advocates of various ideological stripes are battling over what their agenda should be in 2025, when taxes will return to the limelight of fiscal policy debates.

“Donald Trump was very proud of his $2 trillion tax cut that overwhelmingly benefited the wealthy and biggest corporations and exploded the federal debt. That tax cut is going to expire. If I’m reelected, it’s going to stay expired,” Biden wrote on social media on Wednesday, referring to Trump’s 2017 Tax Cuts and Jobs Act (TCJA), a centerpiece of Republican tax policy.

Trump’s TCJA changed the tax code by cutting the corporate tax rate from 35 to 21 percent and by bringing down individual tax rates by between 0 and 4 percentage points, depending on the tax bracket. 

It also increased the standard deduction and the child tax credit (CTC), cut taxes on pass-through entities and international corporate income, and accelerated depreciation write-offs, a provision that has since expired.

Starting in 2026, the individual tax rate reductions in the TCJA will also expire, along with the cap on state and local tax deductions, the boost in the child tax credit, the increase in the standard deduction, the limit on personal exemptions and the repeal of an alternative minimum tax on corporations.

If Republicans can retake the White House and Senate while holding the House, they will have the chance to extend many — if not all — of these expiring provisions. Anything short of a full sweep would force Republicans to negotiate with Democrats, who fiercely oppose much of Trump’s marquee tax law.

Republicans introduced legislation as soon as they retook the lower chamber in 2023 to make the individual and capital gains provisions permanent.

“We need to provide some much-needed relief and certainty to hardworking families and Main Street businesses and ensure these tax cuts do not expire,” Rep. Vern Buchanan (R-Fla.), a sponsor of the measure and member of the House Ways and Means Committee, in a statement announcing the proposal.

The Ways and Means Committee and the Senate Finance Committee are the two panels responsible for tax policy in the lower and upper chambers, respectively.

But the current tax fight extends beyond the TCJA and into renewed proposals to rich Americans, a pledge that Biden has made repeatedly in the past.

His most recent revenue proposals include a plan to increase the top tax rate on long-term capital gains and certain dividends to 44.6 percent as a way to normalize the effective tax rates between high and low earners.

“The rate disparity between taxes on capital gains and qualified dividends on the one hand, and taxes on labor income on the other, also encourages economically wasteful efforts to convert labor income into capital income as a tax avoidance strategy,” the president’s budget says.

Republicans and Wall Street commentators are up in arms about the proposed changes.

“President Biden has formally proposed the highest top capital gains tax in over 100 years,” John Kartch of Americans for Tax Reform, a group that pushes for lower taxes, wrote in a Wednesday policy paper. “Biden’s 2025 budget calls for about $5 trillion in tax increases over the next decade.”

The tax fight comes at a time of ballooning U.S. deficits and rising U.S. interest costs that will cause interest costs to more than double with respect to gross domestic product (GDP) by 2054, according to the most recent budget outlook from the Congressional Budget Office (CBO).

While Biden’s various revenue proposals, according to various estimates, could slash the deficit by between $2 trillion and $5 trillion over the next ten years, extending all of the Trump tax cuts could add as much as $3.5 trillion to the deficit, according to the Joint Committee on Taxation, the official scorer of U.S. tax laws.

Extending the individual tax provisions would raise deficits by $2.49 trillion, along with $278 billion in debt servicing costs associated with those revenue losses.

The totality of the Trump administration’s fiscal policies during its four years in office added $8.4 trillion to the national deficit, according to a January analysis from the Committee for a Responsible Federal Budget, a Washington think tank.

Despite rhetorical hostility from Democrats to the Trump tax cuts, the 2017 law has not been substantially changed during the Biden administration despite the president’s efforts to raise taxes on wealthier Americans and corporations.

Republicans have been happy about the lack of concerted opposition from Democrats on the fundamental structure of the tax law.

“I was pleased that much of TCJA survived during that period,” said former Ways and Means Chairman Kevin Brady (R), in an interview with The Hill. Brady shepherded the TCJA through the House and is now a spokesperson for the Alliance for Competitive Taxation, a tax advocacy group.

“At the end of the day, it survived because Sen. Sinema and Sen. Manchin just put their foot down,” he said, referring to Sens. Kyrsten Sinema (I-Ariz.) and Joe Manchin (D-W.Va.), who forced Biden to scale back his economic agenda and several tax increase.

Brady noted that he was “really frustrated” by the corporate alternative minimum tax (AMT) introduced by Democrats’ Inflation Reduction Act, which beefed up the AMT on corporations after it was repealed by the Trump tax law.

Alex Thompson

By Alex Thompson

Alex is an award-winning journalist with a passion for investigative reporting. With over 15 years of experience in the field, Alex has covered a wide range of topics from politics to entertainment. Known for in-depth research and compelling storytelling, Alex's work has been featured in major news outlets around the world.

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2 thoughts on “Biden vs. GOP: Tax fight heats up ahead of election”
  1. As a tax policy analyst, I believe it’s crucial to reevaluate the expired provisions of the 2017 Trump tax cuts. President Biden’s stance on not extending them aligns with a more equitable approach to tax reform, focusing on benefiting working families rather than the wealthy elite.

  2. It’s crucial that the tax policies are carefully considered and reviewed to ensure they benefit all Americans, not just the wealthy few. President Biden’s stance on letting Trump’s tax cuts expire reflects a commitment to a fairer tax system that prioritizes the middle class and working families.

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