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Both Donald Trump and Kamala Harris, as well as both parties in Congress, are lining up to enact laws that will give targeted tax breaks to favored constituencies. At the Cato Institute, Adam N. Michel describes some of the tax breaks and then concludes that spending cuts are necessary and that perhaps tax freebies for special interests should be eliminated in favor of broad tax reduction. He writes:
Proposals targeting tips, kids, homeowners, domestic production, and seniors are some of the biggest hyper-targeted tax breaks championed on the campaign trail. However, there is no shortage of other proposals to hand out special favors through the tax code. Over at Tax Notes, Martin Sullivan lists 21 additional bipartisan bills currently in Congress, which, in his estimation, are most likely to be included in a 2025 tax package. Every bill on Sullivan’s list includes a new or expanded deduction, credit, or exemption targeted at a particular industry, activity, or voter demographic.
Sixty-five percent of Americans believe the US tax code is too complex, and the same portion thinks tax rates are too high. Complexity and high rates are a product of special-interest tax provisions that accumulate over time. This tradeoff is clearly demonstrated in the recently released Cato tax plan, which cuts tax rates to 100-year lows and offsets the reform by eliminating every true loophole and subsidy in the tax code.
The major tax breaks proposed by Trump and Harris, taken together, would cost trillions of dollars. Add that to the $4 trillion price tag of the 2017 Tax Cuts and Jobs Act extension, and it’s clear that without serious spending cuts, this year’s campaign promises will make the 2025 tax cliff all that much more challenging.
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