Tax policy decisions ahead

Implications of the 2020 presidential election

September 16, 2020

Although the economic impact of the coronavirus pandemic (and the federal response to it) is likely to dominate the fiscal policy debate this election cycle, one of the issues implicitly on the ballot is the fate of President Trump’s signature 2017 tax code overhaul—known informally as the Tax Cuts and Jobs Act (TCJA, P.L. 115-97)—which, among other things, lowered the tax burden for many businesses, whether structured as corporations or passthrough entities, as well as for individuals, trusts, and estates. (For budgetary and procedural reasons, the individual and passthrough provisions generally are scheduled to expire at the end of 2025, with certain other business tax changes phasing in or out even sooner.)

Former Vice President Biden contends that TCJA’s benefits are skewed to large corporations and more affluent individuals and has offered tax policy proposals aimed at addressing that perceived imbalance. President Trump, on the other hand, argues that TCJA’s temporary tax cuts were necessary to fuel economic growth and should be made permanent—and, in some cases, even expanded.

This publication offers a high-level discussion of the two candidates’ tax policy proposals on TCJA and other issues, along with a side-by-side comparison of their positions on certain key tax questions.

Joe Biden: Readjusting the tax burden

Former Vice President Biden is campaigning on the premise that the federal income tax system needs to be retooled to ensure that corporations and high-net-worth individuals are paying “their fair share” and has proposed increasing top income tax rates, along with “base broadeners” such as eliminating or limiting various incentives currently available to these taxpayers.

Under Biden’s plan, revenue generated from these proposed changes to the tax code—nearly $4 trillion over 10 years, according to estimates by the Tax Policy Center and the Tax Foundation, two nonpartisan think tanks—would be used to provide tax relief for lower- and middle-income taxpayers and pay for spending priorities, such as improving the nation’s infrastructure, developing alternative energy sources, and building up the US manufacturing sector.

Donald Trump: Doubling down on TCJA

President Trump’s tax policy platform to date has focused largely on promoting and preserving TCJA. His campaign website touts his success in enacting “historic tax cuts and relief for hardworking Americans,” and the three budget blueprints he has submitted to Congress since TCJA was signed into law in December 2017 assume that the various rate cuts and other temporary tax relief provisions for individuals and estates will be made permanent.

The president’s budget proposals have not, however, indicated his position on certain corporate revenue-raising provisions in TCJA that are currently scheduled to take effect in the next few years, such as changes to the treatment of research and development expenses, further limitations on the business interest deduction, and a phasing out of bonus depreciation—all of which are set to begin in 2022—plus a scheduled increase in the effective rate on GILTI beginning in 2026.

Looking ahead

It is impossible to know right now who will be setting the tax policy agenda when the next presidential administration begins in 2021. But it is worth remembering that no matter who is in the Oval Office, getting tax code changes enacted into law requires willingness on the part of both congressional leadership and the White House to engage and seek to reach consensus.