Rohit Kumar, co-leader of PwC’s Washington national tax services sector, has voiced his concern over the impending termination of the Tax Cuts and Jobs Act, passed by previous US President Donald Trump in 2017. This law, which slashed corporate tax from 35% to 21% and minimised marginal income tax rates for the majority of employees, is predicted to majorly impact US tax policy in the future.
Set to end in 2025, the extension of tax cuts made during Trump’s presidency could intensify the increasing budget deficit in the US by up to $5.5 trillion (€5.0 trillion), Kumar warned a Dublin tax conference. The political party in power in the US after the upcoming election will be tasked with managing the termination of these tax relaxations, as discussed at PwC’s yearly tax policy event.
Mr. Kumar insightfully commented on this, stating that the plans for the tax cuts were established with the full knowledge of their expiration, placing the responsibility of extension to a possibly reluctant Congress. However, the pandemic’s economic downturn and unprecedented rise in government spending were not accounted for when the decisions about these tax reductions were made in 2017.
Kumar informed that if Congress opts to extend everything and not increase taxes on income, the expenses for the United States’ government could total between $5 trillion and $5.5 trillion over the coming decade. He also predicted that the election would decide who has to manage the termination of these considerable tax cuts and likely determine the US’s reaction to the sluggish progression of global tax reforms, as directed by the OECD. The reforms aim to reallocate taxation rights closer to the revenue generation source.
“If Mr Trump succeeds in getting re-elected, it’s highly likely that he won’t alter US corporate tax, however, he may enforce tariffs ranging from 10-15 per cent on all US imports. This move could result in a significant disturbance in global trade, including the export industry of Ireland, according to Mr Kumar. He also pointed out that Kamala Harris, the Democratic candidate, has already voiced plans to hike US corporate tax back up to 28 per cent. Yet, if Republicans maintain control of the US senate, this increase may be politically unachievable. The Finance Minister, Mr Jack Chambers, also shared his insights at the event. He stressed that regardless of the anxiety around how potential changes to the global tax system might affect Ireland, the “certainty and stability” was significantly advantageous for the country.”