Businesses Pummeled as Trump-Era Tax Relief Wanes

Clear Facts

• President Trump’s Tax Cuts and Jobs Act (TCJA) of 2017, which provided a temporary 100% tax write-off for certain business assets, has tapered to 60% at the start of 2024.
• The TCJA significantly reduced the corporate tax rate from 35% to 21% and decreased Americans’ payments in five of the seven income tax brackets.
• Other provisions of the TCJA, such as those related to marginal rates, standard deduction amounts, and the child tax credit, are set to expire in 2025.

The temporary incentive in President Donald Trump’s signature tax law, the 2017 Tax Cuts and Jobs Act (TCJA), has tapered further in 2024, providing less tax relief for businesses grappling with inflation.

The TCJA established a temporary 100% tax write-off for certain business assets, a process known as full expensing. This provision has declined 20% per year starting in 2022, meaning it has dropped to 60% at the start of 2024, according to the Internal Revenue Service.

Full expensing allows businesses to deduct capital purchases like new or improved technology, equipment, or buildings from their tax bill. This measure was designed to encourage greater reinvestment by companies, according to the Tax Foundation.

Ringing in the New Year with higher taxes! 

Full expensing, which allowed businesses to quickly write off purchases, will be reduced to only 60% for 2024. By 2026, this incentive will become extinct.

Democrats are hoping you won't notice the hidden tax hike. pic.twitter.com/h0xkOCYtwN

— Stephen Moore (@StephenMoore) January 3, 2024

The TCJA brought about substantial tax cuts for Americans. It lowered the corporate tax rate from 35% to 21%, aligning the rate with that of many other developed nations. Additionally, it reduced Americans’ payments in five of the seven income tax brackets.

The law also increased the standard deduction from $6,500 to $12,000 for single filers and $13,000 to $24,000 for joint filers for the tax year it was passed. This amount has been adjusted annually in accordance with the rate of inflation.

However, other provisions of the TCJA, such as the rules related to marginal rates, standard deduction amounts, and the child tax credit, are set to expire in 2025, according to MarketWatch.

Shalanda Young, director of the White House’s Office of Management and Budget, stated in March 2023 that President Joe Biden “will not support a penny of new taxes for those making under $400,000. Full stop. That includes ensuring that they don’t lose out when these tax cuts expire.”

Businesses across various sectors are feeling the effects of rising inflation and high interest rates. Consumers are pulling back on spending, impacting industries such as commercial real estate and banking. In 2023, the Federal Reserve raised its federal funds rate to a range of 5.25% and 5.50%, the highest point in 22 years. This move has placed upward pressure on the cost of credit in an effort to curb inflation.

Retail businesses have also been hit hard, particularly with poor sales growth during the 2023 holiday season. U.S. retail sales from November 1 to December 24 rose only 3.1% year-over-year, unadjusted for inflation. Meanwhile, prices rose 3.1% in November year-over-year, far above the Federal Reserve’s 2% target. This has resulted in an over 17% increase in inflation under Biden’s administration.

Clear Thoughts (op-ed)

The tapering of the Tax Cuts and Jobs Act (TCJA) provisions has left American businesses barreling towards a tax mountain. This is more than just a mere inconvenience; it’s an economic hurdle that could significantly impact our country’s growth and prosperity.

The TCJA was a lifeline for many businesses, offering a 100% tax write-off for certain assets. This incentive, designed to stimulate reinvestment and innovation, has now dwindled to a mere 60%.

Moreover, the TCJA’s significant tax cuts, which reduced the corporate tax rate from a crippling 35% to a more globally competitive 21%, and decreased tax payments for Americans across five income tax brackets, are also under threat.

As these provisions are set to expire in 2025, businesses are left grappling with the twin demons of rising inflation and high interest rates. This is not the time to pull back on policies that stimulate growth and investment.

It’s time to reassess and renew our commitment to fiscal policies that truly support American businesses and the broader economy. The expiry of the TCJA provisions is a stark reminder of the importance of sustainable, growth-oriented tax policies.

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