Exploring the Tax Options for 2025 – A Look at the House Ways & Means Committee’s Recent Memo


The House Ways & Means Committee has recently released a significant memo outlining various potential tax options. This document provides a comprehensive look into the committee’s considerations for future tax legislation and reforms, offering a glimpse into the evolving landscape of U.S. tax policy.

Overview

The memo serves as a crucial reference point for understanding the direction of tax reforms. It proposes a blend of revenue-generating measures and tax relief options, setting the stage for upcoming debates as the 2025 expiration of certain Tax Cuts and Jobs Act (TCJA) provisions approaches.

Although the memo is not actionable at this time, it provides great insight into the current universe of tax options along with the estimated cost or savings of such provisions which will be critical as we try to pass legislation through the budget reconciliation process.

We encourage you to take a look at the menu of options at  https://bit.ly/4heoSPZ 

Note Worthy Proposals

  • SALT Deduction Modifications: Options include making the $10,000 cap permanent but doubling it for married couples or increasing the cap to $15,000 for individuals and $30,000 for married couples.
  • Mortgage Interest Deduction Changes: Proposals explore either eliminating the home mortgage interest deduction entirely or lowering the cap from $750,000 to $500,000.
  • Corporate Tax Rate Reduction: A suggestion to further lower the corporate income tax rate from 21% to 20% or 15%.
  • Border Adjustment Tax: A new tax on goods where they are consumed rather than produced, potentially generating over $1.2 trillion in 10-year savings. This is provision that I personally prefer over a true tariff system of taxation and one that has been bantered around for decades.
  • Elimination of Various Deductions and Exclusions: Proposals to eliminate deductions for student loan interest, employer-provided transportation benefits, and the exclusion of scholarship and fellowship income.
  • Consumer Interest Deduction: Allowing a deduction for auto loans or similar consumer debt which was abolished in 1986.
  • IRS Enforcement Funding Repeal: A proposal to repeal the IRA’s IRS enforcement funding, which could increase the deficit by $46.6 billion over 10 years.
  • EITC Restructuring: Aims to simplify the Earned Income Tax Credit to reduce improper payments.
  • Tariff Modifications: Suggestions to codify and increase 301 tariffs on China and implement a 10% across-the-board tariff on all imports.

Implications

The memo’s proposals carry significant implications for various aspects of the economy and tax administration:

Economic Growth

  • Reducing corporate tax rates and increasing expensing for business investments are expected to stimulate economic growth by encouraging business investments and job creation.
  • Simplifying individual tax rates and enhancing the standard deduction may increase disposable income for individuals, potentially boosting consumer spending.

Tax Compliance and Administration

  • Reforms to the IRS’s organizational structure and the establishment of an independent appeals process aim to improve tax compliance and administration.
  • Mandatory e-filing and notice requirements for exempt organizations are intended to increase transparency and accountability.

International Competitiveness

  • Measures to address base erosion and profit shifting (BEPS) and the implementation of a minimum tax on foreign earnings are designed to protect the U.S. tax base and ensure that multinational corporations pay their fair share of taxes.
  • These measures also aim to align U.S. tax policy with international standards and reduce tax avoidance.

Impact on Taxpayers

  • The repeal of certain deductions and credits may increase the tax burden for some taxpayers, particularly those who previously benefited from these provisions.
  • However, the overall simplification of the tax code and the enhancement of the standard deduction may offset some of these impacts.

Conclusion

The memo from the House Ways & Means Committee outlines crucial potential changes to the U.S. tax system. These changes aim to simplify the tax code, stimulate economic growth, improve tax compliance, and align U.S. tax policy with international standards. The implications of these changes will be far-reaching, affecting individuals, businesses, and the overall economy.

We will continue to monitor the pending changes to tax law as TCJA is set to expire at the end of this year. Please let us know if you have any questions regarding the direction of the law and its impact on your specific situation.

Attachment

Scroll to Top