As the election season approaches, there is a significant concern over the expiration of trillions in tax breaks that were introduced through the Tax Cuts and Jobs Act of 2017 (TCJA). These tax breaks have been instrumental in reducing taxes for most Americans, especially those in lower federal income brackets. With the scheduled sunsets of these provisions in 2025, there is a risk of increased taxes for the majority of Americans if Congress does not extend these tax breaks. Both presidential candidates, President Joe Biden and former President Donald Trump, have addressed this issue and proposed different approaches towards addressing the 2025 tax cliff.

President Trump aims to extend all the provisions of the TCJA, while President Biden focuses on extending tax breaks for individuals with incomes below the $400,000 threshold. Despite their differences, it is noteworthy that both candidates are aligned in their goals to support 95% of taxpayers. Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center, highlights this point and emphasizes the shared objective of both candidates in this regard. However, the outcome of future legislative updates post-election will largely depend on which party controls Congress.

One of the key expiring provisions of the TCJA is the lower federal income tax brackets, which have played a role in reducing tax rates for individuals across the board. Without an extension, these tax brackets are set to revert back to higher rates after 2025, potentially impacting single filers and married couples earning above certain income thresholds. Another provision set to expire is the higher standard deduction, which has significantly increased the number of individuals claiming the standard deduction over itemized deductions.

The child tax credit, another important provision introduced by the TCJA, doubled the maximum credit amount and expanded eligibility. While there have been discussions surrounding the expansion of this credit in 2024, debates continue regarding the specifics of the design, including the amount, eligibility, and refundability. Additionally, there have been proposals for tariffs on imported goods, with both candidates expressing varying approaches towards tariffs on Chinese goods. The potential implications of these tariffs on consumers remain a topic of concern.

As 2025 approaches, questions arise regarding how to finance the extensions of the TCJA tax breaks, especially in light of the federal budget deficit. Extending these tax breaks could significantly add to the deficit over the next decade, posing a challenge for policymakers. Biden’s economic advisor, Lael Brainard, has proposed higher taxes on the ultra-wealthy and corporations as a means to fund the extensions for middle-class Americans. However, the specifics of funding these extensions remain a topic of debate, with Trump’s campaign yet to outline concrete plans in this regard.

The impending tax increase in 2025 presents a critical issue that will impact the majority of Americans. The decisions made by policymakers post-election will be crucial in determining the future of these tax breaks and the overall tax landscape in the coming years. It is essential for individuals to stay informed about these developments and understand the potential implications for their financial well-being.


Articles You May Like

Examining the Potential Impact of Federal Children’s Savings Accounts
Unpacking the Challenges of Heirs’ Property and Appraisal Bias in Homeownership
The Economic Progress and Setbacks in China: An In-depth Analysis
The Benefits of Automatic Escalation in Retirement Savings

Leave a Reply

Your email address will not be published. Required fields are marked *