AMAC Exclusive – By Neil Banerji
One of the most important storylines heading into next year’s general election cycle is the fate of former President Donald Trump’s historic tax cuts that set the stage for economic boom times prior to the COVID-19 pandemic.
Among the most notable achievements of President Trump’s first year in office was the 2017 Tax Cuts and Jobs Act (TCJA), the largest overhaul of the federal tax code in a generation. But because Republicans passed the bill without any Democrat support via reconciliation, the cuts were necessarily temporary, and are due to expire in 2025 – unless a conservative Congress and White House are installed to renew (and maybe even expand) them.
Overall, the TCJA represented $5.5 trillion in gross tax cuts, more than half of which went to families. By 2019, the TCJA had resulted in more than 200 major companies like Walmart announcing wage increases for employees. Six million workers reported receiving pay raises, bonuses, or increased retirement contributions.
In addition, the TCJA advanced other conservative priorities. For instance, parents are now allowed to use 529 savings accounts to pay for elementary and secondary school for their children, helping expand school choice.
Trump’s tax cuts were so successful, in fact, that the Biden administration quietly announced their intention to keep parts of them in place earlier this year.
Still, however, Biden’s plan to hike business tax rates and expand other taxes, driving down wages and killing jobs in the process, now threatens to undercut the positive effect of Trump’s tax cuts for families – and could prove disastrous for an economy already reeling from months of record-high inflation.
Since its passage in 2017, congressional Democrats have been itching for a chance to repeal the TCJA. Democrats have specifically railed against the bill’s lowering of the business tax rate from 35 percent – then among the highest in the developed world – to 21 percent, more in line with most developed nations.
Some congressional Republicans, meanwhile, are pushing to make cementing the TCJA a central component of the GOP platform in 2024 – drawing a clear contrast with Democrats.
In February, Rep. Vern Buchanan (R-FL) introduced the “TCJA Permanency Act,” which quite simply “makes permanent provisions affecting individual and business taxpayers that were enacted in 2017 by the Tax Cuts and Jobs Act and are scheduled to expire at the end of 2025” and “makes permanent reductions in individual and capital gain tax rates.” The bill currently has 97 cosponsors and looks set to be a frequent topic of conversation on the campaign trail.
In addition to making the provisions of the TCJA permanent, congressional Republicans are looking to expand tax breaks for individuals and families even further. One measure, the Tax Cuts for Working Families Act, aims to shore up the gains by working class families under TCJA by increasing the standard deduction for both singles and married couples.
Another bill, the Small Business Jobs Act, aims to assist small businesses by increasing their expensing limits for new equipment, the amount of contractor pay which requires a tax form, and restoring the Internal Revenue Service reporting threshold for Venmo and PayPal transactions to $20,000. (Democrats lowered that amount to $600 for 2023.)
Republicans in Congress have also pointed out how disastrous Biden’s other fiscal policies are for the economy. According to a report from the Tax Foundation released in March, Biden’s FY 2024 budget would result in lower wages for workers, reduce U.S. economic growth by 1.3 percent, and destroy 335,000 jobs.
The GOP is aided in these arguments by how poorly Biden has fared on inflation – still one of his greatest political vulnerabilities. Just 34 percent of Americans say they approve of the president’s handling of the economy, and “economy/inflation” remains atop the list of things Americans are most concerned about.
Although the overall inflation rate has now come down somewhat, Americans will not soon forget the months of near double-digit inflation eating into their paychecks and savings. They are also unlikely to look kindly upon tax hikes that will take more money out of their pockets, whether directly or indirectly through decreased wages and economic growth.
The precarious economic state in which the country now finds itself means Trump’s tax cuts are more important than ever. That’s a message which could resonate with voters, if the GOP is wise enough to take advantage of it heading into next year.
Neil Banerji is a proud Las Vegas resident and former student at the University of Oxford. In his spare time, he enjoys reading Winston Churchill and Edmund Burke.
