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Trump’s 2017 Tax Cuts Expire in 2025

Public Citizen News / November-December 2024

By David Rosen

This article appeared in the Nov/Dec 2024 edition of Public Citizen News. Download the full edition here.

An epic political battle over taxes is just around the corner. By the end of 2025, many of the budget-busting tax giveaways to the ultra-wealthy that passed as part of the 2017 Trump tax cuts will expire.

Because tax reforms can be passed through a legislative process known as budget reconciliation, which bypasses the Senate’s filibuster rule, some sort of tax reform package is all but certain to become law during the next session of Congress.

With Donald Trump back in the White House and both chambers of Congress likely under Republican control, the final package that passes is likely to look a lot like the 2017 law or worse. 

But that doesn’t mean Public Citizen will be sitting on the sidelines or that progressives lack ideas about how to make the tax code fairer, more just, and more equitable. 

“The tax fight will be an opportunity to draw a clear contrast between lawmakers who are on the side of big corporations and the ultra-wealthy and those who are looking out for working families and everyday Americans,” said Susan Harley, managing director of Public Citizen’s Congress Watch division and tax policy expert.

Public Citizen was one of more than 100 organizations that called on Congress to support progressive tax reforms. Here’s what that sort of progressive vision of tax reform should look like:

Tax Wall Street Transactions. Public Citizen has long been the leading voice calling for a Wall Street tax — known as a financial transaction tax — on stocks, bonds, and derivative trades. Think of it as a small sales tax for Wall Street trades, like the taxes the rest of us pay when we buy shampoo or shoes. Just a 0.1% tax — that’s 10 cents on every $100 of stocks, bonds, and derivatives trades — would generate an estimated $752 billion over 10 years. That would be more than enough to fund free universal preschool, free community college, and national paid family and medical leave combined.

Let the “Pass-Through” Deduction Expire. One of the costliest provisions expiring at the end of 2025 is Section 199A, which lets non-corporate businesses exempt 20% of their profits from their taxes. The benefits of this deduction are highly skewed toward the richest business owners, such as hedge fund tycoons. Shockingly, this deduction allowed two billionaire families to cut their collective taxes by more than $200 million in a single year.

Restore the Top Marginal Rate. The 2017 Trump tax law cut the top individual tax rate from 39.6% to 37%. The top 400 taxpayers, who reported a combined annual income of $107 billion, got an estimated $800 million tax handout in the first year from this provision alone. Restoring the original rate would generate enough revenue over the next decade to provide paid family and medical leave for every employee.

Strengthen the Estate Tax. As of 2024, households worth up to $27.2 million can pass fortunes down to their heirs without paying even a penny of the estate tax. That threshold will keep increasing with inflation. Extending this weak estate tax for another decade would sacrifice $167 billion in revenue.

Raise the Corporate Tax Rate. The centerpiece of the 2017 Trump tax package was a massive cut in the corporate tax rate, which came down from 35% to 21%. This cost an eye-popping $1.3 trillion in revenue over 10 years. Corporations have used this tax handout to enrich top execs and wealthy shareholders, instead of passing it along to workers and consumers. While the lower corporate tax rate does not expire at the end of 2025, increasing the rate to just 28% would raise trillions in revenue. In addition, the existing stock buyback tax should increase. 

Stop Overseas Profit-Shifting. The No Tax Breaks for Outsourcing Act would eliminate an array of harmful tax provisions that encourage multinational corporations to shift profits offshore, which not only harms U.S. tax revenues but it also worsens outsourcing of jobs and investments. 

Tax Investment Income Like Work. Income from investments should be treated the same as income from wages, and that means equalizing the capital gains tax rate with regular income tax brackets. It also means ending the carried interest tax loophole that treats investment fund managers’ income as capital gains. Doing so would raise $14 billion in revenue over 10 years.

Tax the Super Wealthy. Our current system is not set up to properly tax the ultra-rich. That’s unlikely to change in 2025, but Public Citizen supports a special surtax on the wealthiest households. Depending on the rate and thresholds at which these taxes on the ultra-wealthy are designed, they could generate up to several trillion dollars over a decade.

Stop Subsidizing Executive Bonuses. Corporations should not be able to weasel their way out of paying their fair share in taxes by lavishing executives with gigantic bonuses, which inevitably come at the expense of workers, shareholders, consumers, and taxpayers. Bankers bending and breaking the rules in pursuit of incentive-based compensation was one of the most important causes of the financial crash of 2008 and the ensuing Great Recession. Fully ending the tax deduction for performance-based pay of more than $1 million would raise $272 billion over 10 years. 

Boost Funding for IRS Enforcement. More funding for the IRS is key to ensuring that the agency can continue to hire and train skilled auditors, whose job is to make sure big corporations and the wealthy actually pay what they owe.