Which presidential candidate can avoid impending tax hikes without busting the budget?

Erica York
·4 min read
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The expiration date on the Tax Cuts and Jobs Act (TCJA) of 2017 is rapidly approaching. Come 2026, most taxpayers will be in for a tax hike. This major policy shift will provide a salient opportunity for the next president to influence U.S. tax policy — and taxpayers’ tax bills. But you wouldn’t know it by perusing candidate websites or tuning into the GOP debates.

The TCJA reduced most of the seven individual income tax rates, including lowering the top rate from 39.6% to 37%. It also doubled the child tax credit, nearly doubled the standard deduction, and simplified the tax filing process by cutting back on itemized deductions, among numerous other changes.

The net result for taxpayers across the income spectrum was, on average, a smaller tax bill and a simpler filing process. For example, an Iowa taxpayer who made between $50,000 and $75,000 in 2018 saw an average tax cut of $1,400 under the TCJA.

But since Republicans passed the law under a wonky legislative process to allow only needing 51 votes in the Senate, lawmakers had to make these tax cuts fit into a certain budget window — achieved by allowing most the individual provisions to expire in 2025. With such a massive policy change looming, taxpayers deserve a fully fleshed-out plan for how the next president would prevent across-the-board tax hikes without further plunging the country into debt.

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Instead, taxpayers are getting passive and inadequate remarks on tax policy from their prospective leaders.

Donald Trump’s presidential campaign was the latest to mention the looming tax hikes, indicating a desire to make the 2017 tax cuts permanent while imposing higher taxes on American consumers with an across-the-board import tariff of at least 10%. Though vague, the proposal foreshadows a doubling down on harmful tariff policies implemented during Trump’s first term which hurt U.S. manufacturers and farmers while undermining pro-growth tax changes.

Gov. Ron DeSantis has also indicated he plans to extend the 2017 tax cuts and make the TCJA’s expiring incentives for business investment permanent. But more recently, he has floated another option to instead impose a single-rate flat tax.

Meanwhile, Ambassador Nikki Haley has alluded to tax cuts for small businesses and working-class families, eliminating subsidies and preferences, and getting rid of the federal gas tax.

While there is an apparent appetite for tax reform, the candidates are still giving voters talking points rather than fleshed-out proposals. As serious contenders for the GOP presidential nomination, Trump, DeSantis and Haley ought to thoroughly explain how they will navigate the impending tax hikes without busting the budget. Extending all the 2017 individual and estate tax cuts would come with a massive price tag. Federal tax revenue would fall by $2.6 trillion, and when incorporating added interest costs, national debt would rise by $3 trillion over the next decade. The price tag could climb upward of $4 trillion if candidates also make the TCJA’s business investment incentives permanent. And all that would come on top of the already $20 trillion in new debt Washington will add over the next decade from unbalanced budgets.

Calling for a full extension without offering ideas to address the cost is fiscally irresponsible and shelves debate on the policy specifics that taxpayers deserve to know. Not every part of the 2017 tax changes led to a better tax code. For instance, the requirement for businesses to take deductions for research and development costs over time rather than immediately worsens investment incentives, while the creation of a complicated deduction for noncorporate businesses made the tax code more complex.

Tax Foundation’s recent analysis illustrates how some policies offer more bang for the buck than others. A policy that more efficiently improves incentives for people to work, save or invest or simplifies the compliance process for taxpayers should be prioritized over changes that cost revenue but don’t move the needle as much.

The coming tax hikes in 2026 demand that presidential candidates move beyond rhetoric to explain how they will steer the debate toward a tax code that prioritizes economic growth while responsibly managing the federal budget.

Erica York
Erica York

Erica York is senior economist and research director at the Tax Foundation, a nonpartisan think tank in Washington, D.C.

This article originally appeared on Des Moines Register: Tax cuts set to expire. What are the presidential candidates' plans?