Gearing Up for the TJCA Fight
Tax professionals are becoming keenly aware of the challenges that lie ahead as Congress prepares to tackle the extension of the Tax Cuts and Jobs Act (TCJA) next year. The partisan nature of the bill's passage in 2017, coupled with significant turnover in the House Ways and Means Committee, has created a complex landscape for those tasked with shepherding the legislation through the extension process, and professionals now hang in the balance of waiting to see what will come.
One of the primary concerns is the lack of institutional memory among current committee members. With only five of the 25 Republicans on the committee having been present during the TCJA's passage, there is a notable absence of firsthand knowledge regarding the intricacies of the bill's provisions. This lack of understanding extends to the Democratic side as well, as they were largely excluded from the crafting of the legislation in 2017. The fear now is a failure to extend important provisions or sunset them properly in a way that isn’t a massive upheaval to the tax code and taxpayers.
Despite this, there are areas of potential bipartisan consensus, such as maintaining lower tax rates for most brackets, preserving the doubled standard deduction, and upholding the expanded child tax credit. However, Democrats are less inclined to support the extension of many other TCJA provisions, given their lack of involvement in the original decision-making process. Many provisions on the chopping block impact small businesses currently over-burdened by high interest rates and inflationary costs.
Interestingly, some experts suggest that a divided government may provide the best opportunity for a sustainable, long-lasting extension of the TCJA. A split Congress could help prevent the passage of a purely partisan bill, which might not withstand the test of time. Additionally, it could mitigate the influence of swing voters in each caucus who might otherwise derail the process over issues such as the state and local tax deduction limitation.
As we approach the extension debate, it is crucial to understand the true cost of the TCJA. While the bill was initially scored as costing $1.5 trillion, the actual tax cuts amounted to $5.5 trillion, with $4 trillion in revenue offsets. A full extension of the TCJA is projected to cost $4.6 trillion, a figure that will undoubtedly be a point of contention during negotiations.
While none of us have a crystal ball to aid our tax planning endeavors, understanding the political and economic challenges at play, we can better advise our clients and help them navigate the potential changes to the tax code. As the debate continues, it is essential that we advocate for a balanced, sustainable approach that promotes economic growth and stability for all taxpayers.
Christine Gervais
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
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