In a historic election, the Republican Party secured a trifecta in 2024, winning control of the White House, Senate and the House of Representatives. President-elect Donald J. Trump will begin his second term in January with Republicans holding a majority in both chambers of Congress. This gives business and individual taxpayers a clearer sense of the direction for tax legislation and policy in 2025.
The Tax Cuts and Jobs Act (TJCA) is a top priority for upcoming tax legislation, with many of the current provisions set to expire at the end of 2025. Republicans broadly support extending or making these provisions permanent. However, with the narrow Republican majority of currently 219 and three races being uncalled, even a small number of dissenting Republicans could significantly influence legislative outcomes in the House.
Pivotal Players
The current Speaker of the House, Mike Johnson (R-LA), has retained his leadership role for the next two years, and Jason Smith (R-MO) will continue chairing the influential and powerful House Committee on Ways and Means, which is pivotal in drafting tax legislation.
House Ways and Means Committee Work to Date
With potential tax legislation on the horizon in 2025, the House Ways and Means has begun to develop their policy priorities for 2025 in early 2024.
The House Ways and Means Committee kicked off the 2025 tax reform discussions in mid-April 2024 with a hearing titled “Expanding on the Success of the 2017 Tax Relief to Help Hardworking Americans,” intended to examine the TCJA and other proposed tax legislation to address the expiring provisions.
In what was and now gives an early preview of the debate in 2025, as Democrats and Republicans spent the hearing relitigating the benefits of both the TCJA and the Inflation Reduction Act (IRA). In these hearings, Ways and Means Chairman Smith highlighted the cost of the IRA's clean energy tax incentives and urged Congress to consider the TCJA as a model for tax reform in 2025.
In contrast, at the same time, the Ways and Means Ranking Member, Richard Neal (D-MA), and other Democrats on the Committee questioned the effects of the TCJA on workers and families compared to corporations and urged an extension of the Child Tax Credit.
The House Ways and Means Committee held over one hundred hearings through the 2024 year focused on the impact of the 2017 tax bill, with testimony from business owners highlighting the TCJA's business tax provisions.
Creation of Tax Teams
Similar to previous tax reform working group efforts over the last decade, the House Ways and Means Committee organized "Tax Teams" where each team focused on policy areas that will be affected by the expiring TCJA provisions.
Chairman Smith (R-MO) and Tax Subcommittee Chairman Mike Kelly (R-PA) announced in April of 2024 the formation of 10 Tax Teams that are comprised of Ways and Means Republican members:
- American Manufacturing
- Chair: Representative Buchanan (R-FL)
- Working Families
- Chair: Representative Fitzpatrick (R-PA)
- American Workforce
- Chair: Representative LaHood (R-IL)
- Main Street
- Chair: Representative Smucker (R-PA)
- New Economy
- Chair: Representative Schweikert (R-AZ)
- Rural America
- Chair: Representative Smith (R-NE)
- Community Development
- Chair: Representative Kelly (R-PA)
- Supply Chains
- Chair: Representative Miller (R-WV)
- U.S. Innovation
- Chair: Representative Estes (R-KS)
- Global Competitiveness
- Chair: Representative Hern (R-OK)
The Path Forward and Early Legislation Action
With the Republicans having control of the legislative and executive branches, Republicans have prioritized tax policy.
House Majority Leader Steve Scalise (R-LA) has indicated following President-elect Trump’s priorities that include extending provisions of the TCJA within the first 100 days of his presidency. This timeline suggests legislative action could potentially occur by April 2025, provided the party can determine the scope and cost of tax changes. Early action will depend on resolving policy disputes and prioritizing tax reform amidst other competing legislative initiatives.
Both the Republican and Democratic parties, based on the committees' work on Expanding on the Success of the 2017 Tax Relief to Help Hardworking Americans, seem to agree on a bipartisan basis to extend some provisions of the Tax Cuts and Jobs Act (TCJA) of 2017. Specifically, some common ground when it comes to wanting to benefit small- to medium-sized businesses, such as the provision to eliminate the five-year amortization rule for R&D expenses and for families and individuals through an increased child tax credit.
Disclaimer:
The content focuses on presidential tax proposal plans and is intended to provide general information about the potential tax legislation that may be implemented by the future government. The information provided in this content piece is not intended to serve as legal or tax advice and should not be relied upon as such. The prospective potential legislation mentioned in this content piece is subject to change, and there is no guarantee that any proposed legislation will be enacted into law. Any action taken based on the information provided in this content piece is at their own risk, and Cherry Bekaert shall not be held liable for any such action taken.
