Next year could be the year for reforming the federal tax system, and while we're optimistic, we also recognize the high stakes for our country's future.
President-elect Donald Trump has pledged to extend his signature Tax Cuts and Jobs Act, a 2017 law that revised the tax code and provided some sweet breaks to favored constituents. Many of those provisions are set to expire at the end of 2025 and, given the GOP's control of Congress and the White House, the pressure will be on to act fast. Failure to extend the measures would mean increases for most taxpayers in 2026, and they would have no one to blame but Trump & Co.
During his campaign, the president-elect teased additional giveaways, vowing to eliminate taxes on tips, which doesn't make much sense, as well as Social Security income. Apparently, all kinds of ideas are on the table, which makes the complex job of rewriting tax law even more challenging.
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Throughout the 2000s, the U.S. has lived far beyond its means, as both major parties embraced deficit spending. Extending the Trump tax cuts will jack up the deficit by something like $5 trillion through fiscal 2035. Sweetening the pot with additional goodies would add still more to the tab.
We send our best wishes to the much-ballyhooed Department of Government Efficiency, to be run by tech bosses Elon Musk and Vivek Ramaswamy. We're all for eliminating waste, fraud and abuse. But given governmental instincts for self-preservation, experience teaches us to keep expectations modest.
That leaves the national debt at $36 trillion and counting, threatening to increase inflation, raise interest rates, weaken the dollar and reduce the government's capacity to make strategic investments. It's disappointing to see the GOP, which always claimed to be the party of fiscal discipline when Democrats were in power, freeze out its deficit hawks when it controls the nation's wallet.
Trump has nominated some smart people for his economic team, including Scott Bessent for Treasury secretary, and we're hopeful that grown-up thinking will prevail. Other Trump nominees could work against that, however. Consider Billy Long, a former GOP congressman from Missouri, whom Trump has proposed to head the Internal Revenue Service.
The colorful Long is a professional auctioneer who went into business peddling a fraud-plagued tax credit after leaving public office.
During his tenure, he joined other opportunists in scoring cheap political points by demonizing the IRS and pushing attention-getting tax ideas, evidently for effect.
Exhibit A is Long's effort to scrap the federal tax code, and the IRS along with it, while replacing the lost revenue with a regressive national sales tax.
That would raise the cost of goods and services by anywhere from 30 to 44 cents for every dollar spent. It doesn't take a political genius to recognize that raising the cost of a $1 item to as much as $1.44 would never work. Yet Long pushed for it, and now this unserious nominee is in line to run one of the most serious government agencies.
Rather than promising to tear down the IRS for the sake of sound bites, the GOP needs to get real about change. This agency that everyone loves to hate will be crucial to carrying out its tax plan in 2025 and beyond. And, as Bessent and some of the better Trump nominees surely recognize, the GOP has a precious opportunity to bring about reform, if its more credible leaders are willing to put in the work instead of voicing fantasies about eliminating essential government services.
The complexity of the federal tax code imposes an estimated $546 billion in annual costs on the U.S. economy, including billions of hours in lost productivity and out-of-pocket compliance costs, according to the center-right Tax Foundation. ...
If the incoming Trump administration wants its tax-change plans to be carried out effectively, it should retire its anti-IRS rhetoric and give the agency the tools it needs to get the job done. After all, it's a matter of following the law.
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