Adam N. Michel
Adam N. Michel
The goal of the 2025 tax extensions should be to keep tax rates low and meet calls for additional pro-growth tax cuts, such as a lower corporate tax rate and permanent investment expensing. To do this within the constraints of the reconciliation budget process, Congress will also need to cut spending and find additional tax offsets.
The Tax Cuts and Jobs Act of 2017 (TCJA) increased revenue by approximately $4 trillion through base broadening and other one-time changes. These changes allowed Congress to cut taxes by $5.5 trillion, for a net tax cut of about $1.5 trillion over 10 years. This model of pairing base broadeners with tax cuts should be a road map for 2025.
By offsetting more of the 2025 package, Congress can make a larger share of the tax cuts permanent, improving on one of the TCJA’s biggest weaknesses. The following are 12 revenue-raising reforms that would improve the tax base, close loopholes, and cut special-interest subsidies.
Green energy subsidies. The Inflation Reduction Act (IRA) of 2022 dramatically expanded tax subsidies for politically popular energy sources. Congress should repeal the entire IRA and end the many failed pre-IRA energy tax programs. A clean break with these programs could raise more than $1 trillion over 10 years, allowing consumers to drive the energy sector forward.
Corporate SALT deduction. In 2017, Congress put a $10,000 cap on the state and local tax (SALT) deduction for individual and pass-through businesses. Repealing the deduction for corporations and cracking down on state workarounds would help level the playing between business types and eliminate an inefficient federal subsidy for state and local governments. Zeroing out the individual SALT deduction could, combined with other SALT changes, raise as much as $2 trillion over 10 years. Whatever size Congress decides the deduction should be, » Read More
https://www.cato.org/blog/twelve-ways-trump-improve-tax-code-make-tax-cuts-permanent