The 2024 elections are over. We now know that the Republicans will be in control of the White House and both chambers of Congress. The majorities in the Senate and the House are extremely slim, which will once again make it very difficult for House Speaker Mike Johnson to pass anything – rules packages, budget resolutions, and tax legislation included. All political shifts carry a degree of uncertainty, but with control of the White House and Congress, the Republicans will be eager to move quickly on President-elect Trump’s agenda, so we can begin to speculate on what we can expect during the next term on economic policy, tax legislation, and regulatory oversight. Here are some of the key areas to watch in the coming months:
There are many reasons that we anticipate taxes will be a focus of the new administration – the fact that President Trump’s first term ushered in the Tax Cuts and Jobs Act (TCJA) – the most substantial and far-reaching shift in US tax policy in over thirty years – and the fact that many of those key TCJA provisions are set to expire soon, among others.
Some of the main Trump tax policy proposals include:
- Extending or making permanent some/all of the expiring TCJA provisions (i.e., bonus depreciation, qualified business income deduction, increased standard deduction, and SALT deductibility cap, and others)
- Lowering the corporate tax rate, individual income tax rates, and/or capital gains rates
- Preserving the increased estate tax and gift tax limits of the TCJA
- Eliminating taxes on tipped wages, overtime, and Social Security payments
- Potentially expanding the child tax credit (mentioned by JD Vance on the campaign trail)
- Imposing tariffs (anywhere from 10% – 60%) on imports
Potential of the Republicans to Utilize Reconciliation to Pass Tax Bills with a Simple Majority
Procedurally, one of the most important things to watch as we monitor changing tax legislation is the potential of the Republicans to utilize reconciliation to pass tax bills with a simple majority (51 votes) rather than the 60 votes usually required to overcome a filibuster. This allows for easier passage, but per the “Byrd Rule” any changes made to taxes or spending in this way must not increase the federal deficit beyond the 10-year budget window. Thus, to comply with the Byrd Rule, tax cuts or spending increases that reduce federal revenue cannot extend beyond the 10-year budget window unless they are offset by equivalent revenue increases or spending cuts. If they aren’t offset, the rules must be set to expire at the end of the window. This is why many bills passed under the reconciliation process are often temporary, because making them permanent would require finding long-term revenue offsets, which can be politically difficult. In fact, this is exactly why many of the key TCJA are set to expire at the end of next year, because the Senate used reconciliation to pass the law with a simple majority vote. So, as we watch TCJA and tax negotiations, most of the main points of contention will likely revolve around ongoing deficit concerns!
Regulatory Shifts & Compliance Considerations
In addition to tax legislation, there may also be significant regulatory shifts and compliance considerations. The Republicans have signaled a focus on reducing regulatory burdens, and thus we expect a push for scaling back certain oversight measures, particularly in the financial and environmental sectors. This may include eased compliance requirements for banks and financial institutions could stimulate lending and investment but may also create new risks for consumers and investors. Additionally, the climate-related disclosure rules that we have been monitoring at the federal level may be rolled back or stalled under the new administration. As always, we are working with clients to stay vigilant about evolving compliance requirements and be prepared for rapid changes in reporting standards, particularly if they operate in highly regulated industries like energy, manufacturing, real estate, or digital assets.
Healthcare Policy & Legislation
We’ve seen Republican lawmakers comment on potential changes to healthcare policy and legislation, including the Affordable Care Act (ACA) and Medicaid. Any sort of shift away from ACA requirements could increase flexibility for employers but may also cause significant changes in coverage standards. Similarly, with any adjustments to Medicaid or public health funding may affect healthcare providers and businesses offering employee health benefits. Constant monitoring of these changes is necessary to ensure employers remain competitive and compliant.
With new appointments expected to the Federal Reserve Board, a Republican administration may influence a shift towards a more hawkish monetary policy, potentially supporting the continuation of higher interest rates. Increased interest rates could benefit lenders with increased net interest margins but may also slow down borrowing and refinancing activity for businesses and consumers. President-elect Trump’s campaign focus on reducing inflation through interest rate policy is something to watch from a macroeconomics level, as potential spending cuts could lead to reduced government support programs. As usual, businesses with significant debt or capital needs should evaluate their financing strategies and consider locking in favorable rates where possible.
Shifts in Labor and Immigration Policy
Shifts in labor and immigration policy may have wide-reaching impacts on workforce availability and employment costs. Tighter immigration policies could exacerbate labor shortages, particularly in industries reliant on immigrant labor, such as agriculture, construction, and healthcare. Potential reforms to wage and overtime regulations may affect staffing costs and employee classification, impacting budgeting and HR compliance.
Economic & Regulatory Changes
As we move into a new era of economic and regulatory changes, it’s critical for businesses to be proactive in their planning. During this current lame duck session, things are “status quo” for now, and the potential impacts discussed here are speculative. Importantly, the TCJA (and its various sunsetting provisions) remain in effect and require Congressional action for any changes. As always, we are working to ensure our clients have a full understanding the anticipated impacts of the 2024 election results to better position their entities to navigate new challenges and seize emerging opportunities.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
