A massive political battle over personal taxes vs. corporate taxes, and high-income earners taxes vs. lower- and middle-income household taxes is coming in 2025.
Joel L. Naroff: Managing the sunsetting 2017 tax cuts could be the biggest test of the next Congress and president
When structuring the bill, so many tax cuts were included that it broke the budget bank. Something had to be done. The solution Congress chose was a favorite budgetary gimmick — sunsetting — a clever way of claiming tax reductions would end even though that was never expected to occur.Getting anything done in Congress is difficult even when a simple majority is required. In the Senate, a bill would need 60 votes to just be voted on if it is being filibustered.
The way the Republicans avoided the TCJA exceeding the $1.5 trillion deficit-increase cap was to mandate that some of the tax cuts would sunset, or return to their pre-TCJA levels, after eight years . That way, all the losses in revenue in years 2026 and 2027 would magically disappear, and the CBO score would come in under the cap — which it did.
Put simply, unless Congress acts, a whole range of popular individual tax changes will expire at end of 2025.The dilemma of how to deal with voter-friendly tax changes sunsetting is highlighted by the impact renewing those breaks would have on the federal budget deficit. But the need to save some of the personal income tax changes provides leverage to those who felt the cut in corporate taxes went way too far. A common view at the time was that a 28% rate made the U.S. competitive globally.
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