The looming expiration of numerous tax breaks set to expire after 2025 has the potential to significantly impact American taxpayers. These tax breaks were initially implemented through the Tax Cuts and Jobs Act of 2017 (TCJA). The uncertainty surrounding the future of these tax provisions has become a crucial issue in the current election season, attracting the attention of both Joe Biden and Donald Trump. The stakes are high, as failing to extend these tax breaks could result in tax increases for the majority of Americans. The candidates have differing views on how to address this issue – Trump aims to extend all TCJA provisions, while Biden plans to focus on tax breaks for individuals earning under $400,000 annually.
If the tax breaks introduced by the TCJA are not extended beyond 2025, American taxpayers could face higher tax rates. Some of the provisions that are set to expire include lower federal income tax brackets, which were designed to reduce rates for individuals across various income levels. Without an extension, tax rates will revert to pre-TCJA levels, resulting in potential tax increases for many Americans. Biden has proposed a tax rate of 39.6% for single filers earning above $400,000 and married couples with incomes exceeding $450,000 per year.
Another significant aspect of the expiring tax breaks is the impact on standard deductions and the child tax credit. The TCJA considerably increased the standard deduction, leading to a significant decrease in the number of taxpayers who itemize deductions. If the standard deduction reverts to pre-TCJA levels, more taxpayers may opt to itemize deductions, potentially affecting their overall tax liability. Additionally, the TCJA expanded the child tax credit, which doubled the maximum credit amount and made it more inclusive. While Biden has called for further expansion of the child tax credit, there is ongoing debate in Congress about the specifics of this proposal, including eligibility criteria and refundability.
Both Trump and Biden have expressed support for tariffs on imported goods, particularly those from China. While Trump has advocated for a universal tariff on all U.S. imports and higher tariffs specifically on Chinese goods, Biden has proposed more targeted tariffs. Despite their differences in approach, experts suggest that consumers are likely to bear the brunt of these tariffs through increased prices on goods. This raises concerns about the potential impact on consumer spending and overall economic growth.
Fully extending the TCJA tax breaks poses a significant challenge in terms of funding, particularly in light of the federal budget deficit. The Congressional Budget Office estimates that extending these tax breaks could add trillions of dollars to the deficit over the next decade. Biden’s economic advisor, Lael Brainard, has emphasized the need for higher taxes on the ultra-wealthy and corporations to finance the extensions for middle-class Americans. In contrast, Trump’s campaign has not provided specific details on how to fund the TCJA extensions, raising questions about the feasibility of maintaining these tax breaks in the long term.
The uncertain future of the expiring tax breaks introduced by the TCJA has significant implications for American taxpayers. The decisions made by policymakers in the coming years will shape the tax landscape and have far-reaching effects on individuals and families across the country. As the 2025 deadline approaches, it is crucial for voters to understand the potential consequences of failing to extend these tax provisions and to consider the candidates’ proposals for addressing this critical issue.
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