Tax policy: the implications of a Republican sweep for individual taxpayers

Republicans have swept the 2024 elections, providing a path to pursue their agenda of extending and potentially creating new tax cuts. The United States is in imminent need of tax reform, as many provisions from Republican’s landmark 2017 Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025.

The shape of potential tax reform

With unified control of the government, enacting Republican tax priorities may seem as though it should be simple; however, it’s anything but. There are three main challenges policymakers will face as they attempt to pass a major tax bill:

• Using reconciliation: Republicans will attempt to use the reconciliation process to pass tax reform, allowing them to avoid the 60-vote threshold required to break a filibuster in the Senate. Reconciliation bills are subject to the following limitations:
• They can only include provisions related to revenue and spending, and nothing with “merely incidental” budgetary effects can be included
• They can only increase or decrease the federal deficit by the amount dictated in the budget resolution
• They can’t increase the deficit outside of the budget window, which is usually 10 years
• They can’t make any changes to Social Security
• Influence of individual policymakers: Republicans captured both chambers in the 2024 election, but they won’t be governing with large margins. In the Senate, they’re likely to control with 53 of the 100 seats. Several races in the House of Representatives are yet to be decided, but they will have between 218 and 223 of the 435 seats.  When there are narrow majorities, individual policymakers can exert significant influence. We saw this in 2021 and 2022 with Senators Joe Manchin and Krysten Sinema putting the brakes on President Biden’s Build Back Better agenda and in 2023 when less than 10 House Republicans effectively removed their Speaker. We’re paying particular attention to the State and Local Tax (SALT) Caucus, which includes a of a number of “blue state” Republican representatives, as we head into the 2025 tax debate.