Will the 2024 US Election Change Tax Laws?

As a result of the 2024 election, President elect Donald Trump will have a Republican Senate and a likely Republican House of Representatives as of this writing, although the House majority will be rather slim if that happens after the final vote tallies.  Further, the Senate majority is not large enough to override a filibuster.*  The Democrats have discussed eliminating the filibuster going back to the days of Majority Leader Harry Reid.  However, on November 6, 2024, Senator Mitch McConnell, current minority leader, stated that the filibuster will remain in place when he becomes the majority leader.  Consequently, significant tax legislation will require some level of bipartisanship.**

At various times during the campaign, Mr. Trump has suggested he would replace the income tax with increased tariffs.  While the president does have significant powers with respect to tariffs, repealing the income tax will require congressional action which seems unlikely.

One proposal he has discussed is making the expiring changes in the law as a result of the 2017 Tax Cuts and Jobs Act (TCJA) permanent with the exception of the $10,000 limit on the deduction for state and local taxes (SALT).  Of particular note for our client base abroad was the Global Intangible Low-Taxed Income (GILTI) or GILTI tax.  This was included in the TCJA because Congress detected a gap in potential tax revenues from US Citizens or Corporations that own stock in foreign subsidiaries of US companies – Controlled Foreign Corporations (CFCs).  

This includes:

• Rates and brackets
• Standard deduction
• Personal exemption
• Child tax credit and other dependent tax credit
• Limitations on itemized deductions (excluding SALT) and repeal of Pease limitation (which required taxpayers to reduce itemized deductions by 3% of each dollar of taxable income above certain thresholds.)
• Changes to the alternative minimum tax (AMT)
• Section 199A pass-through deduction and noncorporate loss limitation

He would also make the TCJA estate and gift tax changes permanent, which provides for a lifetime exemption amount of almost $14 million. 

President elect Trump has also stated he would like to completely exempt tips, overtime pay and Social Security benefits from income tax and enact an itemized deduction for interest on loans to purchase an automobile.  He has also said he would repeal the green energy subsidies included in the Inflation Reduction Act.

Of particular interest to US expatriates, in a speech in early October, President elect Trump proposed a tax break to US citizens living overseas to end what he referred to as double taxation.  Advocates for Americans abroad including American Citizens Abroad (ACA) have been working for years on ideas to shift the US from citizenship-based taxation to residence-based taxation.  One option would tax Americans abroad the same way that the US taxes nonresident foreigners. No details of Mr. Trump’s plan have been released.  

It is important to note that the Pay-As-You-Go (PAYGO) Act of 2010 requires that any new tax cuts or increases in mandatory spending must be offset by tax increases or spending cuts.  This is why the TCJA tax cuts were enacted as temporary.  Both the House Ways and Means Committee and the Senate Finance Committee, which are responsible for tax legislation, have their own rules and procedures for analyzing the costs and benefits of proposed tax changes and Congress can waive these requirements.  The US government doesn’t specifically track income tax revenue solely from US citizens living abroad.

If you require further information, please contact a member of our team. 

Article written by David Daley

* The Senate tradition of unlimited debate has allowed for the use of the filibuster, a loosely defined term for action designed to prolong debate and delay or prevent a vote on a bill, resolution, amendment, or other debatable question.  

** Agreement or cooperation between two political parties that usually oppose each other’s policies.