President Trump has been in office for nine days, but it feels more like nine years in light of how much his administration has already managed to do and change.
Trump’s nine-day policy rap sheet includes, among other things: terminating diversity, equity, and inclusion programs at the federal government; pardoning all January 6th rioters; green-lighting immigration crackdowns; instituting a hiring freeze for federal employees; and freezing trillions in federal grants and loans and ending birthright citizenship (both of which were later blocked by federal judges). In case you’re wondering, the breakneck speed at which Trump’s team is implementing his agenda is intentional: the idea is to “flood the zone” and totally overwhelm their opponents so that they lose their focus and capacity to properly fight back.
Taxes have thus far been spared from Trump’s gigantic policy flood, but in all the chaos and craziness, we want to make sure that they still get some attention. We’ve spoken before about how 2025 is a pivotal year for taxes in America, as many of the provisions of the 2017 GOP Tax Cuts and Jobs Act (TCJA) are scheduled to expire at the end of the year. When the moment comes and Trump and Republicans launch their offensive to extend the TCJA provisions, as they fully intend, it is imperative that Democrats be armed and ready to oppose them – and provide an alternative tax agenda that voters can rally behind.
For this week’s Closer Look, we want to give you a refresher on how the TCJA worked to disproportionately benefit wealthy people like us; outline what the Democrats did to counteract the bill’s damage when they had control of the White House, Senate, and House between 2021 and 2023; provide a status update on where things stand with the expiring TCJA provisions now that Republican are in power; and finally, share our own alternative tax agenda that centers the interests of working people that Democrats can adopt to contrast themselves with Republicans.
Background of the Tax Cuts and Jobs Act (TCJA)
The TCJA was the GOP’s signature tax bill that Trump signed into law in December 2017. The law implemented a few changes to the tax code that benefited low-income households, most notably raising the standard deduction and doubling the value of the Child Tax Credit. But its largest provisions – among other things, slashing the corporate tax rate from 35% to 21%; reducing the top marginal individual income tax rate from 39.6% to 37%; doubling the estate tax exemption from $11 million to $22 million (for a married couple); and giving owners of pass-through businesses a 20% tax deduction – overwhelmingly benefited wealthy people like us.
Here are some numbers to put things in perspective for you. This year, the TCJA will give the top 1% of earners a $61,090 average tax cut and the top 0.1% of earners a $252,300 average cut. Meanwhile, the bottom 20% of earners will receive an average tax cut of a mere $70.
It’s worth noting that the tax code was nowhere near perfect before the TCJA. In 2001 and 2003, then-President George W. Bush and Republicans passed a series of huge tax cuts that primarily benefited the ultra-rich. Democrats made some improvements to the tax code after President Obama was elected in 2008, but unfortunately made a tragic misstep in 2013 when they went along with Republicans and kept most of the Bush tax cuts in place. Put simply, the TCJA made a bad situation much, much worse with regard to our rigged tax code.
What did Democrats do?
President Biden and the Democrats had full control of the White House, Senate, and House from 2021 to 2023. They attempted to reverse a lot of the harm that Republicans did to the tax code, and to this end, passed the Inflation Reduction Act (IRA) in August 2022. The IRA ushered in three key tax changes: the institution of a 15% corporate alternative minimum tax, the allocation of $80 billion in additional funds to the IRS, and the creation of a 1% excise tax on stock buybacks.
The tax changes from the IRA were welcome, but the sad fact of the matter is that Democrats didn’t go far enough in their reforms. That’s because their biggest and most progressive tax ideas were thwarted by their two most GOP-donor-friendly senators: Senators Joe Manchin and Kyrsten Sinema, neither of whom is still a Democrat nor in Congress. Sinema, for one, blocked the inclusion of provisions in the bill that would have ended the carried interest loophole and raised corporate taxes.
The other sad side of the story is that the major tax changes that Democrats managed to pass under Biden have been weakened over the last three years. For one thing, the corporate minimum tax hasn’t actually been implemented yet as officials work out various administrative complications; in the end though, it might all be for naught, as Republicans may replace or gut it entirely now that they are in power. The historic infusion of funds for the IRS has also been significantly clawed back as Democrats have capitulated to Republicans’ demands, leaving the agency without the resources to hire skilled auditors to analyze the complicated tax returns of corporations and the ultra-wealthy.
Status of the TCJA’s expiring provisions
To comply with budget rules, Trump and Republicans scheduled a number of the individual provisions of the TCJA to expire at the end of 2025. The so-called “Super Bowl of Tax” is now upon us, and with a trifecta of control on Capitol Hill, Republicans are the quarterbacks.
It’s unclear how much of Trump’s tax agenda Republicans will be able to accomplish given their razor-thin majorities and fractious caucuses. Today, House Republicans ended a three-day meeting at Trump’s Doral resort in Miami without reaching a deal on taxes, with ultra-conservative Freedom Caucus members demanding that significant cuts in government spending accompany whatever tax cuts they pass. But no matter what package they end up pursuing, one thing is for sure: Republicans are in alignment that their 2017 tax breaks for the wealthy and corporations must be extended, and they will find a way – some way, any way – to do it.
At his confirmation hearing, Trump’s new Treasury Secretary, Scott Bessent, said that there would be “devastating consequences” if the TCJA’s expiring provisions are not extended. But he’s got it all backwards. According to a Treasury analysis, if Trump and Republicans extend the TCJA this year, the top 1% of earners will reap an average $32,118 tax cut and the top 0.1% an average $314,266 cut. As for the poorest 10%? They’ll receive a mere $6 average cut. In short, if Republicans get their way, the rich will once again get the lion’s share of the benefits, with only a few crumbs left behind for working people.
Our alternative tax vision
When the time comes, Democrats have to stand firmly against extending any tax cut that disproportionately benefits wealthy people like us. They must only lend their support to extending elements of the TCJA that benefited working people, like the enhanced standard deduction and Child Tax Credit.
But as the last election made painfully clear, it’s not enough for Democrats to merely point out problems with the Republican agenda without offering strong, viable alternatives. In other words, it’s not enough for Democrats to say “We’re against Republicans’ tax cuts for the rich” but then, in the same breath, fail to offer any kind of policy alternatives that would unrig the tax code and benefit working people.
Even if the expiring provisions of the TCJA are not extended, thanks to the Bush-era cuts, the tax code will still be a muddy mess. If Democrats want to win back the affections of working-class voters, they need to come up with an effective cleaning solution to sell to them.
That’s where we come in. The Patriotic Millionaires already have solid, concrete tax proposals that Democrats can take up to contrast themselves with Republicans. Among other things, they can pass a tax on the unrealized gains of America’s richest households, like Representative Steve Cohen’s Billionaire Minimum Income Tax or Senator Ron Wyden’s Billionaires Income Tax – and prevent billionaires like Elon Musk and Jeff Bezos from paying $0 in federal income taxes. They can pass our Cost of Living Tax Cut Relief Act and eliminate federal income taxes for taxpayers that don’t make a living wage, as well as our Equal Tax Act to tax investment income at the same rate as labor income. (Stay tuned for more details on both!) They can atone for their sin of appeasing former Senator Sinema in 2022 and close the carried interest loophole. They can reform the estate and gift tax system.
In the coming weeks and months, Trump will continue to flood the zone with every right-wing policy imaginable – including and eventually some kind of deal to extend the worst of the TCJA before the end of the year. If Democrats want to weather the storm, they need to find a life raft and adopt a real and transformative tax policy agenda that centers the interests of working people, not wealthy people like us. And if they’re having trouble finding one, they’re welcome to borrow ours.