On Friday, October 18, KWLM’s Todd Bergeth talked with Managing Partner Joel Gratz and Director, John Christianson. They discussed key federal tax provisions that are set to expire, along with the tax policies of the 2024 U.S. presidential candidates.
Listen in and take in their expert insights! We have additional takeaways and details below.
Current State of Federal Tax Provisions
Several key federal tax provisions, initially introduced by the Tax Cuts and Jobs Act (TCJA), are set to expire on December 31, 2025, unless Congress enacts new legislation. If these provisions sunset as scheduled, several significant changes will impact taxpayers.
The standard deduction will be reduced by half, and personal exemptions will return for dependents, reversing some of the TCJA’s simplifications. Tax brackets will also see about a 3% increase, with income thresholds for each bracket lowered, potentially pushing more income into higher tax rates.
The current $10,000 cap on state and local tax (SALT) deductions will be removed, but this comes with the return of the alternative minimum tax (AMT), which could increase taxes for certain high earners.
Additionally, the child tax credit will be slashed nearly in half, and small businesses and pass-through entities will lose the 20% 199A deduction. Estate tax exemptions will be reduced to $14.3 million for married couples, affecting estate planning strategies. Finally, AMT phase-out thresholds will be reinstated, potentially broadening the number of taxpayers subject to AMT.
These looming changes could have wide-reaching implications, making it critical for taxpayers to plan accordingly.
Trump Proposed Tax Policy
As the 2024 presidential election approaches, one of the key issues on the table is tax policy. Former President Donald Trump’s proposed tax plan highlights several extensions and adjustments aimed at continuing the benefits introduced under the Tax Cuts and Jobs Act (TCJA). He plans to extend the individual income tax provisions of the TCJA and eliminate taxes on Social Security benefits. Additionally, Trump seeks to restore business-related benefits, such as 100% bonus depreciation and the ability to deduct research and experimental (R&E) costs.
Trump’s corporate tax strategy includes lowering the corporate tax rate from 21% to 20% for all corporations and reducing it even further to 15% for companies involved in domestic production. He also proposes eliminating taxes on tips and overtime pay, potentially increasing take-home pay for many workers. On the trade front, Trump suggests imposing tariffs of 10%-20% on most imported goods, with much steeper tariffs ranging from 60%-100% on goods from China.
While these policies are designed to stimulate economic growth and favor domestic businesses, they come with a cost. According to the Penn Wharton Budget Model, Trump’s tax plan is estimated to increase the U.S. deficit by $5.8 trillion over the next 10 years. In terms of impact on individual taxpayers, all taxpayers would see some benefit under Trump’s plan, though the majority of these benefits would go to the top 1% of earners.
Harris Proposed Tax Policy
Alternatively, Vice President Kamala Harris proposal includes extending the TCJA provisions for taxpayers earning less than $400,000 in net income, while raising the corporate tax rate from 21% to 28%. For high-income earners with over $1 million in net income, capital gains taxes would increase from 20% to 28%. Additionally, the plan proposes eliminating taxes on tips, a move that would benefit many service industry workers.
The child tax credit would also see a substantial boost, increasing to $3,600 for children aged 2-5 and up to $6,000 for a child’s first year. The Earned Income Tax Credit (EITC), which supports low- and moderate-income workers, would be expanded, especially for those with children. Medicare taxes would rise from 3.8% to 5% for individuals earning more than $400,000 in net income. First-time homebuyers could receive a $25,000 down payment assistance, and the tax deduction for startup costs would expand from $5,000 to $50,000, potentially encouraging more entrepreneurs to launch businesses.
However, these proposals come with a fiscal cost. The Penn Wharton Budget Model estimates that this plan could increase the U.S. deficit by $1.2 trillion over the next decade. While the policies aim to provide significant benefits to lower-income taxpayers, the top 1% of earners would bear a larger financial burden under this plan.
As campaigns intensify, both Trump and Harris are making promises to gain voter support. With a divided government, there’s hope for healthy debate and compromise on tax legislation, focusing on the issues rather than deepening political divides.
Presidential Candidate Views on Renewable Fuels and Agriculture
The 2024 presidential candidates have very different approaches to their renewable fuels and agriculture policy.
The Biden administration passed the Inflation Reduction Act (IRA), which focuses on climate, energy, and infrastructure initiatives. This includes tax incentives for low-carbon technologies, tailpipe rules that favor electric vehicles (EVs), and support for sustainable aviation fuel (SAF). Harris has indicated her intent to continue many of these policies, including expanding EV charging infrastructure, setting stricter tailpipe emissions rules, supporting higher ethanol blends at gas stations, and working towards a goal of producing 3 billion gallons of SAF by 2030. Harris also supports low-carbon tax credits, including those benefiting climate-smart farming practices.
In contrast, Trump is expected to reverse much of the IRA. His focus is on redirecting clean energy funding to traditional infrastructure projects and bolstering the oil and gas industries. He would likely reduce the effectiveness of low-carbon tax incentives and cut EV-related incentives.
Regarding the Renewable Fuels Standard (RFS), which the Environmental Protection Agency (EPA) manages by determining Renewable Volume Obligations (RVOs), the candidates diverge as well. Trump previously supported year-round E-15 ethanol use but also approved 88 waivers for oil companies, leading to a reduction of over 4 billion gallons of ethanol demand. Meanwhile, the Biden-Harris administration has supported E-15 year-round and denied 105 waivers, preventing any ethanol demand destruction.
This stark contrast in renewable energy and agricultural policies underscores the importance of the upcoming election for these industries.