2024 Election: Navigating the Looming Tax Cliff and Candidates’ Stances on Key Tax Policies
The looming “tax cliff” tied to the Tax Cuts and Jobs Act (TCJA) is an important issue that Vice President Kamala Harris and former President Donald Trump will have to address if either one makes it to the Oval Office. Many provisions of the TCJA are set to sunset at the end of 2025, and without action from Congress, this could impact everyone from low and middle-income families to the ultra-wealthy. As the 2024 election approaches, both candidates are developing their tax agendas, and there are key differences in where they stand on the expiration of TCJA issues.
Regarding income tax rates, Harris has committed to not raising taxes on those earning less than $400,000 a year and may potentially support taxing investment earnings for those earning $1 million or more annually as regular income. Trump has not committed to a plan but has discussed replacing federal income tax with tariffs. Trump has also suggested extending the tax cuts enacted by the TCJA.
On the corporate tax rate, Trump has pledged to lower it even further from the current 21%, while Harris aims to raise it to 28%. The impact of these proposals could lead to either a reduction in federal revenue or an increase in deficit reduction.
Regarding the child tax credit, Harris aims to restore and make permanent the pandemic-era expansion from the American Rescue Plan, while Trump’s vice presidential candidate JD Vance has proposed enhancing the credit to $5,000 per child. The potential costs of these proposals could lead to additional borrowing or significant expenses.
Finally, on the estate tax exemption, Harris has endorsed a bill that aims to reduce the exemption to $3.5 million and introduce a surtax on estates valued over $1 billion. It remains unclear whether Trump would extend exemptions on estate taxes or eliminate them altogether. The impact of this decision could result in a significant loss of revenue and potentially reduce charitable donations from estates.
Overall, the outcome of the 2024 election will determine whether key tax provisions from the TCJA will be rewritten by Democrats or if Republicans will opt to extend or let them expire. As both campaigns continue to shape their tax policies, it is important to stay informed on these proposed changes as they could have a significant impact on individuals’ wallets in the future.