Friday, November 22, 2024

Washington faces a giant tax debate in 2025. How Kamala Harris or Donald Trump would navigate it.

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Yahoo Finance is spending the final days of the 2024 campaign examining key economic decisions that, like it or not, will confront the next president. For an even deeper look at all of the financial issues that matter most to your pocketbook, please see Yahoo Finance’s interactive guide to the 2024 election.

Whichever candidate prevails this November will immediately become the loudest voice in a fierce tax debate set to consume Washington in 2025.

Policymakers will have to decide what to do about cuts signed into law in 2017 that expire at the end of the first year of the next president’s term.

There is one area of significant agreement within the sprawling debate between Vice President Kamala Harris and former President Donald Trump: They both think taxpayers who make under $400,000 a year should see their tax cuts extended.

But that’s about it. The two nominees disagree on how to pay the tab, and both want to push other far-reaching — not to mention expensive — priorities into any final bill.

Yahoo Finance photo illustration (Images: Getty Images)

What Trump is promising is a complete extension of the cuts for individuals of all income levels, included in his 2017 Tax Cuts and Jobs Act, alongside a dizzying array of additional promises from no taxes on tips and overtime to lowering taxes for big business.

All told, a complete Trump tax agenda comes with a price tag in the neighborhood of $9 trillion over the coming decade, according to the Center for a Responsible Federal Budget (CRFB). And he laid out nary a concrete way to pay for it all.

Harris, meanwhile, has signaled a different tax approach — only pushing to extend cuts for those making less than $400,000 a year alongside a new expansion of things like the child tax credit and the earned income tax credit.

But it’s still a hefty price tag, likely above $4 trillion, with the vice president laying out tax increases elsewhere to try and balance out the costs.

“The composition of Congress is critical,” said Charles Myers, the chairman and founder of Signum Global Advisors and former adviser to figures like Hillary Clinton and Joe Biden.

Read more: Trump vs. Harris: 4 ways the next president could impact your bank accounts

He noted that a scenario in which either president faces at least one chamber of Congress controlled by the opposition, which he sees as the most likely scenario, will quickly force a massive lowering of expectations.

“As long as we have divided Congress,” he said in a recent interview “literally almost every tax proposal, whether it’s Trump promising to cut taxes for everyone [to] Harris’s corporate tax cap gain tax, taxing unrealized cap gains, none of that happens.”

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