Familiar Policy Battles Will Bog Down Tax Cliff Talks Into 2025

Common policy fights—deficit spending, the size of individual and family tax credits, and how to encourage business investment—will be back in 2025 tax overhaul talks, but finding balance to satisfy all sides could be more complicated than ever, a former GOP tax writer said.

Rates for income, capital gains, and estate taxes were among the big focuses during the fiscal cliff clash in 2012. Then the 2017 GOP-led tax law brought greater attention to overhauls in international, individual, and corporate tax rates. Ahead of next year’s expiration of most of the 2017 individual provisions, lawmakers will be forced to grapple with how to offset the cost of the package, and they’re facing a global tax landscape that’s changed radically since 2017.

“The individual side often drives the policy debate, and the public debate, on tax policy,” said former House Ways and Means Committee Chair Dave Camp (R-Mich.), now a senior policy adviser in PricewaterhouseCoopers’ Washington National Tax Services. “It’s ascending complexity from ‘12 to ‘17 to ‘25.”

Camp recently spoke to Bloomberg Tax with Rohit Kumar, a former aide to Senate Minority Leader Mitch McConnell (R-Ky.), about the upcoming negotiations on expiring provisions from the mammoth 2017 tax overhaul. Kumar is now a principal and co-leader of PwC’s National Tax Services.

The growing complexity means 2025 won’t just be an examination of what worked and didn’t work in the 2017 law known as the Tax Cuts and Jobs Act, Camp said. Lawmakers also will have to address the debt limit, decide whether to incorporate new tax policy proposed on the campaign trail by the presidential candidates, and choose a path for how the US addresses the OECD-negotiated global tax deal.

Election’s Impact

Having to answer to voters who care about policies that hit home—such as the estate tax, child tax credit, and state and local tax deduction—means lawmakers will be forced to balance the individual side of the code with whether to tweak business breaks.

Election projections showing that whatever party wins in November will have a narrow majority could make that dance even harder, Camp said.

“If there’s a one-vote margin, that’s going to be a big factor on what each side wants to accomplish,” he said.

The Michigan Republican, who served in the House from 1991 to 2015, is no stranger to ramp-ups ahead of tax fights. A decade ago, Camp set up working groups ahead of the release of a 2014 tax proposal. Earlier this year, Ways and Means Chair Jason Smith (R-Mo.) launched his own tax working groups. The 10 tax teams have been fanning out across the country to hear from business leaders and taxpayers.

“Businesses got interested in the 2017 exercise maybe January, February of 2017,” Kumar said. “They got interested in this thing, like, a year and a half ago, because they could all see it coming.”

While most of the business breaks in the 2017 tax law were made permanent, Republicans have acknowledged that all provisions may be on the table as lawmakers look for ways to offset a potential package’s cost. And worried businesses have been pushing to preserve the corporate rate that TCJA slashed from 35% to 21%.

Companies have also been modeling to get answers on how to react if, for instance, Democrats were able to raise the corporate rate from 21% to 28% as candidate Harris has suggested, Kumar said.

“You’ve got four-and-a-half trillion dollars of tax cuts expiring,” he said. “Nobody is immune from the transaction.”