There are a lot of uncertainties as we head into the November elections, but one thing we know for sure is that one of the signature legislative packages passed by a Republican Congress and signed into law by President Donald Trump—the 2017 Tax Cuts and Jobs Act—will expire at the end of 2025. The lobbying efforts to either extend or eliminate that laware already underway.
There’s a lot at stake, because that law:
- Reduced individual and corporate tax rates
- Increased the standard deduction
- Provided for a more generous child tax credit
- Included the section 199A deduction that permits owners of sole proprietorships, S corporations or partnerships to deduct up to 20% of the income earned by the business
- Capped state and local tax deductions
- Doubled the estate tax exemption
Tax breaks are largely popular, but they are also costly. According to the most recent estimates, the Congressional Budget Office projects that extending the Trump tax cuts for the next decade—as some Republicans have proposed—would add $4.6 trillion to the deficit.
The federal deficit is estimated by the CBO to reach $1.9 trillion by the end of 2024.
That CBO report, which was written at the urging of Sen. Sheldon Whitehouse, D-Rhode Island, chairman of the Senate Budget Committee, and Sen. Ron Wyden, D-Oregon, chairman of the Senate Finance Committee, finds that the extension would cost $1.1 trillion more than previously estimated.
“Republicans have planned all along on making Trump’s tax handouts to the rich permanent, but they hid the true cost with timing gimmicks and a 2025 deadline that threatens the middle class with an automatic tax hike if they don’t get what they want,” Wyden said. “In short, they’re focused on helping the rich get richer, and everybody else can go pound sand. Democrats are going to stand by our commitment to protect the middle class while ensuring that corporations and the wealthy pay a fair share.”
The Harris campaign has reportedly pledged not to raise taxes on anyone making less than $400,000 a year, a move that could still cost trillions in lost revenue. At the same time, Democrats are expected to raise taxes on some of the wealthiest individuals and corporations.
The top Republican on the Senate Finance Committee, Sen. Mike Crapo, R-Idaho, suggested that if Republicans gain control of both the White House and Congress, they will use the budget reconciliation process to extend all of the TCJA provisions and likely make another cut to the corporate tax rate, which is now 21%, along with some changes to the Section 199A deduction that would benefit small businesses.
Democrats would likely support an extension of the Section 199A deduction but would probably try to reduce its benefit to high-income businesses, Crapo said.
“We’re either going to have a fight over huge tax increases for the larger financial entities … or we’re going to have a big fight over extending most of the TCJA and then tuning it up to get it a little bit better,” Crapo said of differences between the Democratic and GOP approaches to the TCJA expiration.
The Section 199A deduction benefits farmer co-ops and their members. Based on a survey of National Council of Farmer Cooperatives members, most of whom were national or regional, the deduction was worth more than $2 billion in 2023, 95% of which was passed to members of the co-ops, the group said. Most small, local co-ops were not included in the survey, so the value of the deduction is likely larger.
Regardless of how the tax debate plays out in the halls of Congress, there is likely to be heightened attention to the federal debt and deficit early next year. In January 2023, the U.S. Treasury reached its debt ceiling of $31.4 trillion and, after six months of contentious debate, Congress finally voted to suspend the ceiling until Jan. 1, 2025.
Editor’s note: Sara Wyant is publisher of Agri-Pulse Communications, Inc., www.Agri-Pulse.com.
