The 2024 race for the White House officially kicked off with the Iowa State Fair and the first Republican presidential candidate debate with another debate this week. The stage is set for a high-stakes showdown as Republicans aim to make President Joe Biden a one-term president. Amidst the backdrop of criminal indictments and political drama, the contours of each Republican candidate’s policy proposals are taking shape. In this second installment of our 2024 election coverage primer, we delve into one of the most crucial issues in American politics: taxes. The issue of taxation has deep historical roots in the United States, with the founding fathers forging the nation during a period of intense resistance to taxation from Britain. This article explores how the leading Republican presidential candidates are positioned on this core pillar of economic policy.
Today, Republican orthodoxy tends to follow a simple mantra: lower taxes lead to personal freedom and economic growth. This simple pitch makes for compelling contrast opportunities, but obscures underlying fiscal problems. America’s tax code is an overly complex system, loaded with incentives, subsidies, carve-outs, credits and conflicts. For all the retail politicking and sloganeering likely to come (remember Herman Cain’s 9-9-9 plan?), the next Republican president will face a slew of difficult choices over how to reduce spending, raise revenues or both to deal with the massive $1.7 trillion budget deficit. BTW, it’s estimated the deficit will increase to over $2 trillion for fiscal year 2024.
If a Republican wins the White House in 2024, their tax policy will hang under the shadow of the 2018 Tax Cuts & Jobs Act. The Republican-led tax overhaul was one of the biggest updates to the tax code in three decades when it was signed into law by former President Trump in 2017. But critical features of the legislation, including changes to income tax brackets and child tax credits, are due to sunset in 2025. At the same time, the changing macroeconomic environment is raising the costs of U.S. government deficit spending and supercharging the fight over the debt ceiling. It’s likely the US will experience another government shutdown in October over reducing spending. The potent cocktail of issues is set to collide with the next U.S. president’s tax plans. Let’s take a look at how several of the Republican candidates’ views stack up.
The former president has made his role in securing the Tax Cuts & Jobs Act central to his re-election bid. The legislation permanently reduced the corporate tax rate in the United States from 35% to 21%, introduced immediate expensing of capital investments, and transitioned the country from a global tax system to a territorial one. On the personal side of the tax code, the law doubled the standard deduction available for taxpayers, reduced income tax rates, and increased the child tax credit. Democrats largely dismissed the measures, claiming they benefit wealthy individuals disproportionately. But that has never stopped the former president from touting his view of the legislation’s benefits, which include “unleashing economic growth between 2017-2019” and increasing real wages for American workers.
As Trump seeks re-election, he has not provided many specifics on future tax changes he would pursue if given a second term. However, a Super PAC aligned with Trump’s agenda has called for making all provisions of the Tax Cuts & Jobs Act permanent. This would entail maintaining the lower corporate tax rates and the individual tax cuts implemented by the legislation. Additionally, the group has expressed a desire to further lower corporate tax rates and reduce tax rates on paychecks and small businesses. These proposals align with Trump’s previous positions on tax policy, emphasizing lower taxes as a means to drive economic growth.
One notable aspect of Trump’s tax legacy is the Opportunity Zone program. Created as part of the tax overhaul, Opportunity Zones provide tax incentives for real estate developers who invest in distressed neighborhoods. Trump has often touted this program as a means to revitalize neglected communities, with approximately 9,000 Opportunity Zones created under the initiative.
In addition to these specific proposals, Trump has also said that he would like to simplify the tax code and make it easier for businesses to operate. He has also said that he would like to reduce the amount of money that the United States spends on foreign aid.
It is still unclear what specific tax policies Trump would pursue if he is re-elected. However, it is clear that tax reform is a top priority for him.
Ron DeSantis’ tax priorities are laid out in his Declaration of Economic Independence, a set of ten policy principles geared toward supporting economic growth and American workers. DeSantis outlines several ideas for personal and corporate taxes, such as:
- extending the individual tax rates and seeking permanence
- incentivizing the repatriation of U.S. capital from China and encouraging long-term, domestic investment
- Making immediate expensing permanent and maintaining territoriality for U.S. corporations
While DeSantis does not provide concrete proposals, the theme of tax code simplification runs throughout his tax code ideas. He is opposed to complicated tax policies and seeks to “purge the code of K Street carveouts and loopholes.”
As Governor of Florida, DeSantis has a track record of implementing targeted tax programs that benefit families with children. For example, in 2023, he initiated a sales tax exemption in Florida for essential baby products such as diapers, cribs, and strollers. Additionally, he supported limited sales tax holidays for back-to-school shopping and disaster preparedness. Collaborating with Republicans in the state legislature, DeSantis designated several weeks as sales tax holidays to assist families with their financial needs.
Mike Pence, the former Vice President of the United States and former governor of Indiana, has earned a reputation as a staunch advocate for tax reduction. As he sets his sights on the 2024 presidential race, Pence has articulated his commitment to promoting “pro-growth tax policies” that he believes will create favorable conditions for investment in America. A key pillar of his tax agenda involves supporting and extending the provisions of the Tax Cuts & Jobs Act, aligning him with other Republican presidential hopefuls who share the goal of making the reductions in income tax rates permanent. Pence is also expected to draw on his experience as the second in command at the White House to bolster his campaign.
Looking even further into Pence’s past, one finds a consistent commitment to lowering the tax burden for individuals and businesses. His actions as governor of Indiana included cuts to personal income, corporate, and property taxes. The downward moves were not huge orders of magnitude – personal rates fell from 3.4% to 3.23%, while corporate rates nudged down from 6.5% to 4.9 The cumulative impact of these tax cuts, though not staggering in individual terms, amounted to significant savings for Indiana residents. Pence estimated that these measures collectively saved over $3 billion for the people of Indiana during his time as governor.
Furthermore, Mike Pence’s stance on special tax programs underscores his commitment to fiscal conservatism and responsible taxation. He opposed raising the gas tax in Indiana, reflecting his aversion to raising taxes on everyday essentials. Additionally, Pence ended the estate tax in the state, a move that aligned with his belief in reducing the tax burden on families and individuals.
While Trump and Pence claim credit for the Tax Cuts & Jobs Act, Tim Scott was arguably more critical in shepherding the legislation through the legislative process. Scott was one of the select few Republicans who was present at the bill signing ceremony in 2017 and continues to be a vocal supporter of the tax package. He hailed the passage of the bill as fixing the “broken tax code” and supporting “working families.”
Scott is largely credited as the architect of the Opportunity Zone program, which incentivizes real estate investment in poor communities. Scott’s policy proposal, including his Opportunity Agenda released during his time in the Senate, is littered with special programs and initiatives that are geared toward supporting upward mobility and economic development.
In addition, Scott has demonstrated an affinity for protecting individuals from aggressive enforcement of tax laws. In 2023, Scott introduced the IRS Accountability and Taxpayer Protection Act. This law would require changes to IRS tactics when seeking settlements with taxpayers who owe money to the U.S. government. Like on broader economic policy, Scott offers the most creative and unique approach to tax policy among the field of Republican candidates. Still, he has largely voted in lockstep with Republicans during his tenure in Congress.
Former New Jersey Governor Chris Christie, one of the Republican candidates in the 2024 presidential race, has maintained a relatively sparse campaign website, offering little information on his policy proposals, including tax policy. However, a closer examination of his public statements and his record as governor of New Jersey provides insights into his views on taxation.
On the individual tax side, Christie has frequently advocated for lowering the overall income tax rate. As governor, he vetoed personal income tax hikes passed by the legislature five times in six years. He also proposed 10% cuts to personal income tax that were never taken up by the legislature. For corporate taxes, Christie has been similarly enthusiastic about lowering rates. He signed a package of business tax cuts into law as governor, and often advocated for lowering the federal corporate tax rate during his last run for president.
When it comes to special programs, Christie’s record is more mixed. During his time as governor, Christie oversaw an increase in the gas tax and reduced a property tax rebate program that was broadly popular in the state. These moves demonstrate Christie’s commitment to pragmatism and balanced budgets. At the time, New Jersey was facing a revenue shortfall of upwards of $2 billion. Furthermore, when it comes to federal issues, Christie did speak out in favor of maintaining the current cap on state and local tax deductions. The deductions were capped through the Tax Cuts & Jobs Act, much to the dismay of voters in high-tax jurisdictions like New Jersey and New York.
Key Takeaways from Republican Candidates’ Tax Policies
In examining the diverse range of approaches and perspectives within the current field of Republican presidential candidates, several critical takeaways emerge.
First and foremost, it is evident that the candidates universally share a broad endorsement for the Tax Cuts & Jobs Act. This landmark legislation, signed into law during former President Donald Trump’s tenure, brought about significant changes to the nation’s tax code. Many of the Republican candidates have explicitly expressed their desire to make the tax breaks introduced through this act a permanent fixture of American tax policy.
This consensus around tax cuts aligns with the general orientation of the current Republican field, which strongly advocates for lowering tax rates on both individuals and businesses. It’s a position that resonates with the party’s traditional values, emphasizing that lower taxes can drive economic growth, create jobs, and empower individual taxpayers.
The political landscape today bears a striking resemblance to the year 2010 when tax cuts initially passed under President George W. Bush’s administration were scheduled to expire. Back then, it was Democratic President Barack Obama who found himself embroiled in a prolonged political debate over whether to act before certain tax provisions sunsetted. Now, in 2024, if Republicans succeed in reclaiming the presidency, they may face a similar scenario, where their party’s own legislation, the Tax Cuts & Jobs Act, is up for renewal. While the president’s options will be constrained by the composition of Congress, it appears highly likely that a Republican president would pursue extending, if not making permanent, the provisions of this influential tax law.
Secondly, the Republican candidates’ strong inclination to cut taxes often stands in apparent contradiction to the goal of reducing the federal deficit. Lowering taxes typically results in reduced government revenue, potentially exacerbating the burden of the national debt. Republicans seek to resolve this inherent tension by asserting that, over the long term, the economic growth spurred by lower taxes will compensate for the short-term revenue reductions. In other words, they argue that the federal government will ultimately benefit by receiving a smaller share of a much larger economic pie.
This theory has not consistently manifested in practice. Presidents George W. Bush and Donald Trump, both Republicans, presided over significant expansions in the federal deficit despite their tax-cutting efforts. The challenge is compounded in 2024 and beyond, with rising interest rates increasing the cost of U.S. government borrowing. It becomes increasingly difficult to envision how a Republican president could extend the tax cuts introduced through the Tax Cuts & Jobs Act while remaining committed to reducing the U.S. debt burden. While one potential solution would involve slashing government spending, none of the candidates have shown willingness to advocate for cuts in critical areas such as defense and healthcare, which constitute a substantial portion of federal expenditures.
Thirdly, it is evident that all Republican candidates view special tax incentive programs as pivotal tools for achieving their desired economic outcomes. These programs, which include initiatives like Opportunity Zones and various tax incentives for businesses, play a central role in their policy proposals. They are seen as instrumental in promoting economic growth, incentivizing investment, and achieving specific policy objectives.
However, the apparent simplicity of incentivizing desired business behaviors through targeted tax breaks must grapple with the intricate realities of a complex and competitive global marketplace. The efficacy of such incentive programs may depend on the specific details and execution, as well as broader economic factors beyond the control of the U.S. government.
In the unfolding drama of the 2024 election, the tax policies put forth by Republican candidates hold the power to significantly shape the trajectory of American economic policy. As the nation grapples with the enduring legacy of the Tax Cuts & Jobs Act, the dynamic macroeconomic environment, and the persistent debate over the debt ceiling, the decisions made by the next U.S. president in the realm of taxation will carry far-reaching implications. It is in this arena that the simplistic slogans and resonating ideas of political campaigns must confront the intricate realities of global markets and capital allocation. Implementing transformative changes in the tax code is a formidable challenge, and each Republican candidate offers a unique vision for their preferred tax policy. Yet, as the campaign unfolds and debates intensify, it remains to be seen how these visions will navigate the intricate web of economic complexities that are not entirely within the president’s control.
The key for all Republican candidate’s success in reducing the budget deficit would be an effort to reduce spending. Plans must focus on entitlement spending for Social Security and Medicare as these are the major drivers of long-term deficits and debt. Sadly, no Republican candidate makes any effort to address these spending programs. Thus, the future for reducing the massive budget deficit (and debt) will be likely based on the sunsetting of the TCJA (individual taxes), raising additional individual income taxes and raising corporate taxes. Sadly, it’s a negative growth story. The only way this changes is if there is a financial crisis involving a downgrade of the US debt, a sinking economy, a sinking stock market and a sinking US dollar. Then maybe(?), politicians from both parties will come together to solve it.