Biden vows to let Trump-era tax cuts expire next year, meaning higher rates for many
President Biden vowed to let massive components of the Tax Cuts and Jobs Act expire next year if he wins re-election, meaning that millions of Americans could soon face steeper tax bills.
"Donald Trump was very proud of his $2 trillion tax cut that overwhelmingly benefited the wealthy and biggest corporations and exploded the federal debt," Biden tweeted Tuesday. "That tax cut is going to expire. If I’m reelected, it’s going to stay expired."
Enacted by former President Donald Trump in 2017, the law drastically overhauled the nation's tax code, including reducing the top individual income tax bracket to 37% from 39.6% and nearly doubling the size of the standard deduction.
However, those changes to the individual section of the tax code are poised to sunset in 2025, meaning that many taxpayers — including those who earn less than $400,000 — will face steeper levies if the law is not extended.
BIDEN ISSUES NEW RULE TO CRACK DOWN ON BAD RETIREMENT ADVICE
"If lawmakers allow full expiration to occur, most Americans will see their personal tax bills rise and incentives for working and investing worsen," said Erica York, senior economist and research director at the Tax Foundation.
In addition to lowering the top tax bracket for wealthy Americans, the Trump-era law raised the thresholds for several income tax brackets — essentially lowering the liability for many households.
The individual income tax brackets in 2017, before Trump's tax law took effect:
REMOTE WORKERS FACE A DOUBLE TAXATION THREAT
The individual income tax brackets in 2024, under current tax law:
The expiration of the tax law on Dec. 31, 2025, will essentially mean that many Americans will be forced to pay anywhere between 1% to 4% more in taxes unless certain provisions are extended or made permanent, according to the Tax Foundation.
BIDEN TRAILS TRUMP IN MOST BATTLEGROUND STATES AS VOTERS SOUR ON THE US ECONOMY
The matter is likely to be a source of contention during the general election. Trump has pledged to make the tax cuts permanent if he is re-elected in November. Treasury Secretary Janet Yellen previously suggested that President Biden would seek to retain the tax reductions for Americans earning less than $400,000 during a second term in the White House,
A White House official told FOX Business that Biden's tweet reiterates what is in the president's budget — that tax cuts would expire for those earning more than $400,000, but stay in place for lower- and middle-income Americans earning less than $400,000.
The problem, however, is that the Congressional Budget Office estimates extending the TCJA would add roughly $3.7 trillion to the federal budget deficit.
The original law was partially paid for by the so-called SALT deduction cap, which limits the amount of state and local taxes that Americans can deduct from their federal taxes to $10,000. That cap is also poised to end in 2025.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
However, the SALT cap as a revenue generator has lost some potency since 2017, thanks to fresh workarounds.
"Though lawmakers may not address the looming expirations this year, they should prepare for the upcoming expiration by weighing the trade-offs of each change the 2017 tax law made," York said. "Lawmakers should cement into law a tax code that promotes growth and opportunity without worsening U.S. debt."