Tax talk heats up on campaign trail

 

The fight over the future of tax policy continued to gain traction on the campaign trail, with the official release of a sparse Republican tax platform, the endorsement of a proposal to exempt tips from tax among key Republicans, and tax emerging as a discussion point during the first debate.

 

 

 

Debate

 

Questions about President Joe Biden’s status as the Democratic nominee overshadowed substantive policy disagreement at the first presidential debate on June 27, but tax policy actually featured prominently throughout the evening. Republican presidential candidate Donald Trump accused Biden of proposing to hike taxes, while Biden reiterated rhetoric about raising taxes on the wealthy and corporations.

 

 

 

Biden’s status and Harris tax record

 

The status of Biden as the presumptive Democratic nominee remains contentious, and a change could affect the outlook for tax policy.

 

Should Biden bow out — an unprecedented departure this far into a modern presidential campaign — Vice President Kamala Harris appears to be the most likely replacement due to campaign finance, ballot access, and political realities.

 

The former California senator’s tax stances from her 2020 presidential run are largely consistent with Biden’s own policies, though there are some notable differences. Harris ran on restoring the corporate rate to 35% (versus 28% for Biden) and imposing a financial transaction tax. Like Biden, Harris also ran on raising the highest tax bracket back to 39.6% and raising the capital gains rate. If made the Democratic nominee, she would likely continue the administration’s pledge not to raise taxes on those earning under $400,000 per year. However, if she were to take on the nomination and be elected president, a future President Harris would likely revisit some Biden administration proposals, like a raise of the corporate alternative minimum tax. 

 

 

 

Republicans release tax platform

 

Republicans released an official 2024 campaign platform that lays out tax priorities, but with little or no details. The document pledged to make the Tax Cuts and Jobs Act permanent, eliminate tax on tips and pursue unspecified “additional tax cuts.”

 

 

 

Tip proposal

 

The proposal to eliminate taxes on tips is gaining traction and has become a core part of campaign messaging. In addition to being one of the only proposals mentioned in the official Republican platform, Republicans in Congress have already introduced legislation to implement it. House Speaker Mike Johnson, R-La., has also endorsed it, even indicating the House could hold a vote on it this year.

 

 

 

Debts and deficit

 

Republicans remain divided somewhat over the issue of debt and its impact on tax policy. Many traditional Republicans have argued that extensions of favorable tax policy help the economy and do not need to be offset. But there is a growing group Republicans who appear more reluctant about adding to the deficit with tax cuts, and House Ways and Means Chair Jason Smith, R-Mo., has openly talking about the corporate rate being on the table, as has his fellow Republican and Missourian, Sen. Josh Hawley.     

 

The Congressional Budget Office released new numbers June 18 showing the expiration of the TCJA could grow individual income taxes as a share of GDP to 9.7% of GDP up from more prior estimates.

 

In 2024, under current law, personal income tax revenues are already expected to rise in relation to gross domestic product by half a percentage point, from 8.1% to 8.6%, according to the Congressional Budget Office’s latest budget and outlook report. 

 

The budgetary scorekeeper expects that approximately $270 billion increase in income tax revenues collected to contribute most of the anticipated year-over-year increase in revenues collected by the government, with corporate tax revenues also estimated to rise $100 billion, or based on collections so far this year. The nonpartisan, official governmental budget office explained this by saying that it expects an unusually high amount of taxes delayed in 2023 to be paid this year. Payroll taxes are expected to increase the least, by $64 billion, decreasing by a tenth of a percentage point of GDP.

 

The cost of various tax policy options may help determine the legislative outcome of the coming debate depending on the results of the election. 

 
 

Contacts:

 
 
 
Content disclaimer

This content provides information and comments on current issues and developments from Grant Thornton Advisors LLC and Grant Thornton LLP. It is not a comprehensive analysis of the subject matter covered. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC and Grant Thornton LLP. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this content.

For additional information on topics covered in this content, contact a Grant Thornton professional.

Grant Thornton LLP and Grant Thornton Advisors LLC (and their respective subsidiary entities) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. Grant Thornton LLP is a licensed independent CPA firm that provides attest services to its clients, and Grant Thornton Advisors LLC and its subsidiary entities provide tax and business consulting services to their clients. Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.

 

 

Tax professional standards statement

This content supports Grant Thornton Advisors LLC’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. If you are interested in the topics presented herein, we encourage you to contact a Grant Thornton Advisors LLC tax professional. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact a Grant Thornton Advisors LLC tax professional prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton Advisors LLC assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.

Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.

 

More tax hot topics