Democrats and Republicans as they vie for control of the White House and Congress. Whichever party manages to secure a full sweep in the elections stands to gain unchecked power in reshaping taxes for millions of Americans. With the expiration of many of the GOP’s Trump-era tax breaks due in 2025, the election outcome will determine whether Republicans can maintain the current tax cuts, Democrats can propose their own revisions, or whether a split government will lead to a contentious battle over fiscal policies. While the focus of the election may not primarily revolve around tax structures, both parties are actively strategizing to address the implications of the imminent “tax cliff.” This article explores the potential advantages in gift and estate taxes if the Republicans win the 2024 election.
The Importance of Winning All Three Branches:
To effectively reshape the country’s tax structure, winning all three branches of government (House, Senate, and Presidency) becomes crucial. The ability to pass tax policy changes with simple majority votes through congressional budget rules allows for significant reform even with closely divided House and Senate seats. Past examples, such as the imposition of a new corporate minimum tax by a 50-50 Democratic Senate, demonstrate the significance of every single congressional campaign. Winning or losing a few House or Senate seats can determine the outcome of tax gridlock or a party’s ability to rewrite the entire tax code.
Republican Approach: Extending or Expanding Trump Tax Cuts:
Republican leaders have expressed their intention to extend the expiring Trump tax cuts, particularly focusing on income tax rates. While some Republicans may advocate for expanding or remodeling these tax cuts, there remains a careful approach due to the potential for Democrats to label any repeal plans as tax hikes. Democrats’ proposed tax increases on high earners faced obstacles in the previous Congress, as some Democratic senators hesitated to touch income tax rates. This hesitation, along with President Joe Biden’s commitment not to raise taxes on individuals making less than $400,000, indicates the possibility of preserving certain elements of the Trump tax cuts.
Democratic Ambitions: Taxing the Wealthy and Prior Campaign Promises:
Democrats have long pledged to tax the wealthy, and the 2024 election cycle will likely see this agenda continue. Despite their opposition to the GOP tax bill, Democrats face challenges in fully reviving their expired child tax credit expansion. However, extending or retaining the Trump tax cuts would also carry a significant price tag. Future Democrat debates may revolve around spending revenues from new taxes on high earners for the child tax credit, infrastructure, or industrial policy. Additionally, Democrats, including those from high-tax areas, aim to eliminate the Trump-era cap on deductions for tax payments.
Potential Advantages and Challenges:
If the Republicans win the 2024 election, there could be certain advantages in the gift and estate tax realm. The Republican Party might consider rolling back changes made by Democrats since Trump left office, such as higher IRS funding and added taxes on large corporations. They may also revisit the estate tax exemption, which was doubled under the Trump administration, providing potential relief for wealthy individuals with significant estates. However, any tax policy changes would likely face internal party debates and potential resistance from Democrats, leading to a complex and challenging legislative environment.
The outcome of the 2024 elections will determine whether Republicans can retain their current tax cuts, or if Democrats will have the opportunity to rewrite them. Furthermore, in the event that neither party secures a clean sweep, a split government scenario could lead to a potential fiscal collision, raising concerns about how the tax structure will be handled.
In a rapidly changing global financial landscape, individuals seek reliable and efficient solutions to protect and manage their assets. Southpac Group offers a comprehensive range of solutions tailored to meet the diverse needs of clients worldwide. If you would like to enquire about our services, contact us now.
