What will the GOP’s tax plan for next year offer?
That’s a very important question now that the party controls the White House and the Senate and has been called the winner in the House of Representatives race by some news sites but not by the Associated Press yet.
Republicans led by President-elect Donald Trump are likely to act quickly in the new year to deal with the end of the tax cuts they negotiated in 2017 and to address other tax policy issues.
An Inflation Reduction Act measure that can give up to $7,500 to people who buy electric cars is one tax credit that looks like it will be taken away.
Aruna Kalyanam, a tax policy expert at the accounting company EY, said that the chance of getting rid of that broad EV credit is “really rather high.”
She also said, “I also think it’s going to be something that’s done in a temporal sense—that is, this credit expires at this time,” during a conference call with reporters on Tuesday.
That is, Republicans would probably get rid of the credit by pushing back the date when it is no longer available. The credit is valid until 2032 thanks to the Inflation Reduction Act, a Democratic law passed in 2022.
In general, Kalyanam said, “laws that were passed by partisans are almost certainly the first to be thrown out in some way, shape, or form. This could be for philosophical reasons, or it could be for really basic revenue reasons.”
It is thought that the future Republican tax plan will cost at least $4 trillion. Getting rid of some parts of the IRA would bring in more money and help pay for it.
“A lot of chaos in the energy industry” could happen if the IRA was completely thrown out.
XLE -0.69% and doesn’t seem likely, but Kalyanam says that early terminations, like stopping some credits early, could be a simpler option.
Elon Musk, a wealthy businessman and a friend of Trump in the EV industry, has said that he’s not too upset about the $7,500 credit going away.
This is what Musk, CEO of Tesla Inc. TSLA 0.09%, said during an earnings conference call in late July: “I guess there would be, like, some impact, but I think it would be devastating for our competitors and would hurt Tesla a little.” “But I think in the long run it will actually help Tesla,” he said.
Colleen O’Neill, another tax expert at EY, said on Tuesday that Trump’s plans to raise tariffs are making business clients nervous after last week’s election. The next president-elect wants all imports to be taxed at 10% or up to 20%, and he wants to put a 60% tax on Chinese goods.
“There is a lot of stress here, especially for clients who have factories overseas,” O’Neill told reporters. “I talked to a client in retail XRT 1.13% yesterday, and they’re thinking about what these tariffs will mean for them.” How will all of this look? Are there going to be exceptions? And would the exception depend on what kind of good it was? Would the exception depend on which country is the counterparty?”
She also said that the timing of any tariffs is very important because Trump’s inauguration is coming up on January 20.
“The last thing businesses want to know is, ‘How quickly could we see this?'” O’Neill said. “Could this have happened on January 21 when tariffs were put in place by the government without any input from the people? If so, could there be a negotiation process afterward?” Is it really that fast? Or, since taxes are seen as a possible way to bring in more money, could they be put on hold until the reconciliation process is over?”
Republicans are likely to pass their tax plan through a budget process called “reconciliation.”
