The U.S. Capitol in Washington, D.C. on April 20, 2021. (Photographer: Stefani Reynolds/Bloomberg via Getty Images / Getty Images)
However, those changes to the individual section of the tax code are poised to sunset in 2025, meaning that many taxpayers – including those who earn less than $400,000 – will face steeper levies if the law is not extended.
“If lawmakers allow full expiration to occur, most Americans will see their personal tax bills rise and incentives for working and investing worsen,” said Erica York, senior economist and research director at the Tax Foundation.
Sen. Ron Wyden, D-Ore., said he will work with other Democrats to come up with a “menu” of possible tax provisions they want to prioritize next year. Wyden mentioned a plan that he proposed in 2021, which would require billionaires to pay taxes on unrealized capital gains.
View of the Internal Revenue Service (IRS) building in Washington, D.C., on January 24, 2023. ((Photo by STEFANI REYNOLDS/AFP via Getty Images) / Getty Images)
IRS PENALTIES ON AMERICAN TAXPAYERS SURGED NEARLY 300% LAST YEAR
The proposal would set the so-called billionaires’ income tax at $1 billion in income, or three consecutive years of $100 million or more in income. It would affect roughly 700 taxpayers, or about 0.0002% of the richest Americans.
“The menu means that we’re doing our homework. We’re coming up with smart, cost-effective ways to close loopholes,” Wyden said last week. “Make no mistake about it: When we do, we’re going to look at ways to get that help to areas that really need it, like housing and child care, and billionaires and multinational companies are going to pay their fair share.”
Understanding Lease Agreements Amidst Tax Changes
In addition to lowering the top tax bracket for wealthy Americans, the Trump-era law raised the thresholds for several income tax brackets, essentially lowering the liability for many households.
Sen. Ron Wyden, D-Ore., speaks during a news conference in 2021. (Bill Clark/CQ-Roll Call, Inc via Getty Images / Getty Images)
The expiration of the tax law on Dec. 31, 2025, will mean that many Americans will be forced to pay anywhere between 1% to 4% more in taxes unless certain provisions are extended or made permanent, according to the Tax Foundation.
The matter is likely to be a source of contention during the general election. Trump has pledged to make the tax cuts permanent if he is re-elected in November. President Biden, meanwhile, has said that he would allow the tax cuts for the wealthy to expire, while preserving the reductions for those making less than $400,000 during a second term in the White House.
The Congressional Budget Office estimates extending the TCJA would add roughly $3.7 trillion to the federal budget deficit.
