The 2024 election will likely have significant impacts on tax policies, although the specific changes will largely depend on the winning candidate and the balance of power in Congress. Here are the main tax implications each party proposes:
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Republican Approach: If Republicans maintain or gain control, their tax policies would likely extend or make permanent the Tax Cuts and Jobs Act (TCJA) provisions, which are set to expire in 2025. Former President Trump, if elected, has advocated for further reductions, potentially lowering the corporate tax rate from 21% to 15%. For individual taxes, he supports permanently reducing tax rates and is interested in novel tax cuts like exempting tips and overtime from income tax for certain workers. Trump also proposes eliminating Social Security income tax for retirees and has expressed support for higher tariffs on foreign goods to boost federal revenue and encourage domestic production​
Democratic Approach: Democrats, led by Vice President Harris if she wins, favor revisiting TCJA’s benefits, especially for high-income earners and corporations, potentially increasing the corporate tax rate back to around 28% from 21%. Harris has expressed support for tax relief specifically targeted at middle- and lower-income families, including proposals to extend the Child Tax Credit and expand the Earned Income Tax Credit (EITC). She supports measures aimed at reducing the tax burden on households earning under $400,000, while introducing higher taxes on capital gains and investment income for high earners and considering a 25% minimum tax on individuals with wealth over $100 million​
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TCJA Expiration and Possible Compromises: Regardless of which party wins, the impending expiration of TCJA provisions presents challenges. If provisions are allowed to expire without new legislation, marginal tax rates, standard deductions, and credits like the Child Tax Credit would revert to higher pre-TCJA levels, affecting middle-income households the most. Both parties may need to compromise, especially if the government remains divided, to pass any tax reforms in 2025 or early 2026. Historically, bipartisan agreements, like the 2012 “fiscal cliff” deal, have been crafted under similar circumstances, suggesting some extensions and targeted increases could happen as a middle ground​
The outcome of this election will determine the direction of tax policy, with Republicans likely favoring broader tax cuts and Democrats focusing on targeted relief for lower-income households and tax increases on higher earners and corporations. The control of Congress will play a key role in shaping the extent of any changes.
