WASHINGTON — President Joe Biden’s decision not to seek reelection is upending expectations about who will control Washington next year. But there is one thing lawmakers and lobbyists are certain of: A tax fight is coming.
Across the nation’s capital, preparations are quietly starting for what some are calling the “Super Bowl of tax.” On Capitol Hill, Republicans and Democrats are holding strategy and education sessions. Lobbyists are pressing their case to lawmakers and preparing multimillion-dollar publicity campaigns to defend tax breaks for corporations. Think tanks are churning out research assailing or lauding elements of the byzantine tax code.
On the line is the future of the Tax Cuts and Jobs Act, which a Republican Congress passed and former President Donald Trump signed into law in 2017.
To avoid blowing too large of a hole in the federal budget at the time, Republicans scheduled many of the tax cuts to expire after 2025. That deadline has created a rare opportunity to reshape federal tax policy next year, and lawmakers in each party intend to be ready to wield whatever power voters give them in November.
“We’re studying and preparing,” said Sen. Michael D. Crapo of Idaho, who as the top Republican on the Senate Finance Committee has been holding meetings and gathering ideas about next year. “It’s preseason.”
Many of the expiring tax measures are ones that benefit middle-class Americans, including a larger standard deduction, lower marginal income tax rates and a more generous child tax credit. Republicans chose to let those tax cuts expire — while making other measures like a lower 21% corporate rate permanent — in a bet that Democrats would eventually vote to protect them.
Their political logic has so far borne out. Many Democrats favor extending the tax cuts for most Americans: Vice President Kamala Harris supports Biden’s call not to raise taxes on households making less than $400,000 per year, according to a Harris campaign aide. Trump and many Republicans want to extend all of the tax cuts — and potentially cut taxes further.
Republicans are considering whether they would try to pay for extending the 2017 tax cuts, which would cost the federal government roughly $4 trillion in lost revenue over a decade, according to estimates from the nonpartisan Congressional Budget Office. Some Republicans have said they could vote to raise taxes on corporations, a suggestion that runs counter to Trump’s desire to cut the corporate tax rate again if he is reelected.
Democrats say they want to pay for extending any tax cuts, but it is unclear how exactly they would do so. Harris has pledged to raise taxes on the wealthy and corporations, yet her campaign has not detailed all of her tax-policy views. People who have previously worked for her said she would likely stick to many of the Biden administration’s positions.
“She’s not trying to reinvent the wheel here,” said Yasmin Nelson, who was Harris’ tax adviser in the Senate and now works for Holland & Knight, a law and lobbying firm.
Then there is the fact that many lawmakers and policy activists, eyeing a huge piece of legislation that Congress will likely pass, are preparing long lists of other ideas and requests to include in any eventual deal. Without action in Congress next year, 62% of American tax filers would see their taxes go up, according to the Tax Foundation, a right-leaning think tank.
“When you’re looking at rewriting the tax code for the biggest economy on the planet, a lot of things are in play,” said Kevin Brady, who was the Republican chair of the House Ways and Means Committee in 2017 and now consults on tax issues for corporate clients.