{"id":163,"date":"2024-11-13T20:03:32","date_gmt":"2024-11-13T20:03:32","guid":{"rendered":"https:\/\/www.bourbonnaistax.com\/blog\/?p=163"},"modified":"2024-11-13T20:03:32","modified_gmt":"2024-11-13T20:03:32","slug":"gaze-into-our-crystal-ball","status":"publish","type":"post","link":"https:\/\/www.bourbonnaistax.com\/blog\/gaze-into-our-crystal-ball\/","title":{"rendered":"Gaze Into Our Crystal Ball"},"content":{"rendered":"
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As President Donald Trump\u2019s first year in office drew to a close, Washington gave us the Tax Cuts and Jobs Act of 2017. That legislation reformed the system in conventional Republican fashion by broadening the base (subjecting more income to tax) and lowering rates. On the corporate side, they did this mainly by closing avenues to avoid tax on international income. On the individual side, they did it by raising standard deductions and eliminating or limiting personal deductions such as mortgage interest and state and local taxes.<\/p>\n\n\n\n

However, the act\u2019s drafters ran into a buzzsaw known as the Byrd Rule, which states that
legislation passed under \u201creconciliation\u201d rules (and thus not subject to filibuster) can\u2019t increase the deficit outside the 10-year budget window. They chose to make the corporate cuts permanent. But the personal cuts, like Cinderella\u2019s carriage, turn into a pumpkin at midnight, December 31, 2025.<\/p>\n\n\n\n

As that date draws closer, the tax world is speculating what might happen. If the personal cuts expire entirely, as the law provides, taxes go up for 62% of Americans. That\u2019s unacceptable for both parties, making some form of extension inevitable. House Ways & Means Chair Jason Smith has called 2025 \u201cthe Super Bowl of taxes.\u201d But it\u2019s been hard to place bets when we don\u2019t know who\u2019s taking the field! To add to the challenge, the Senate Budget Committee estimates that extending the cuts will heap another jillion trillion dollars onto the deficit.<\/p>\n\n\n\n

Last week\u2019s election offers some clarity. With Republicans retaking the White House and
Senate, and on track to retake the House of Representatives, a broader extension looks likely. That suggests no hikes on income over $400,000, as Democrats had called for, and none of the longshot proposals like taxing unrealized appreciation for taxpayers with net worths over $100 million. It also may mean some of the newer proposals may become law. Take, for example, the proposal to eliminate tax on tip income. (That was Donald Trump\u2019s idea, until Kamala Harris stole it fair and square.)<\/p>\n\n\n\n

The incoming administration has also proposed boosting tariffs on imports, mainly from China, and using that revenue to cut income taxes. That\u2019s a total wild card. Most economists say that companies will simply pass those along to consumers, risking higher inflation and a slower economy. Having said that, Tuesday\u2019s results suggest \u201cmost economists\u201d don\u2019t carry much weight with the voting public.<\/p>\n\n\n\n

Finally, the permanent 21% corporate rate may change as well. Trump proposed lowering it
another point or two as he campaigned. But a surprisingly bipartisan group of legislators,
including perhaps a dozen Republicans, support raising it to perhaps 28%. This is largely due to the broader Republican shift from traditional Wall Street Journal-style conservatism to a more populist posture.<\/p>\n\n\n\n

Don\u2019t expect quick answers, though. Back in 2012, the Bush tax cuts were scheduled to expire at midnight, December 31, just like the TCJA. After a year of wailing and gnashing of teeth about the looming \u201cfiscal cliff,\u201d it took Congress until 11PM on January 1 to pass legislation implementing smaller increases. (Never forget that our Congress is the undisputed master of putting off until tomorrow what they don\u2019t feel like doing today. If procrastination were an Olympic event, Congress would be ruled too professional to compete.)<\/p>\n\n\n\n

What does all that mean for us? Assuming Republicans retake the House, most of the strategies we currently use to cut your tax should remain available for your use. And Washington may open new opportunities, too. It will take planning, though. So be ready for us to reach out to make it happen!<\/p>\n","protected":false},"excerpt":{"rendered":"

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