Personal Finance

21 Tax Laws Changes Congress Should Make - But Probably Won't... Or Maybe Not

John Seetoo

Published: February 9, 2025 1:33 pm

It’s no secret that the crushing inflation and economic hardship wrought by the Biden Administration’s policies were a major reason for the landslide presidential electoral victory in November by President Trump. With the costs of necessities like food, medicine and fuel skyrocketing, voters longed for the return of the Trump economic policies and financial bounties of only 5-8 years ago. 

President Trump’s landmark 2017 Tax Cuts and Jobs Act (TCJA) is the foundational legislative platform that allowed individuals to keep a greater portion of their hard earned money and removed many of the red tape handcuffs that had suppressed entrepreneurism and small business initiatives under the Obama Administration. 

A good portion of these gains slowed and were then hampered by the 2020 pandemic, subsequently getting snuffed out by the Biden Administration’s added regulatory burdens and inflation-fueled profligate spending, with the help of a compliant Congress. President Trump’s new administration is already restoring optimism, with billions in investment money began returning to the US in only a few weeks since his electoral victory.

A number of accounting and legal firms have weighed in on the further steps in tax reform the second Trump Administration will undertake, based on campaign vows and the popular results from the TCJA. Some of the proposals, such as doing away with the IRS, were met with derision and skepticism. Although Republicans have a slight House majority and a more solid one in the Senate, conventional wisdom holds that such a move would be unlikely to get the necessary votes, but that other initiatives might have a somewhat better chance. More recent events in the news might now improve those odds. 

Taking Tax Reform Further Past TCJA

President Trump has long advocated for a simplification of the tax code, and TCJA made significant strides in that direction. The success of individual provisions that directly benefited roughly 65% of American citizens were set to expire in 2026. Some of the expected changes and revisions expected include:

• Extending the individual tax cut rates and lower brackets of TCJA and making them permanent. This would prevent a tax burden increase on the bulk of the middle class.
• Increases to the child tax credit to $5,000 and the potential introduction of credits for other dependents will help millions of families struggling to make ends meet.
• Making the doubled standard deduction and elimination of personal exemptions permanent. This would simplify tax returns and reduce the need for audits to examine the legitimacy of returns with aggressive deductions.
• If the exemption levels become permanent, AMT (Alternative Minimum Tax) will affect far fewer taxpayers and reduce its reach on the middle class.
• Limitations on SALT (State and Local Tax) deduction caps to $10,000 addressed some inequities, as these deductions mostly benefit the wealthy. Continuing them would make taxes more progressive, simplify tax returns, and eliminate deduction abuses.
• TCJA doubled the gift tax exclusion and exemption amounts. Making them permanent will ensure that millions of families will be able to keep their farms and small businesses within the family, instead of being forced to sell in order to pay onerous estate taxes.
• The mortgage interest deduction was reduced from $1 million to $750,000 and may be renewed. Increases to the standard deduction again simplify tax returns and reduce accounting abuses on the mortgage interest deduction. 
• Elimination of the Healthcare Mandate, which was a de facto Obama tax.

On the corporate level, a number of the TCJA initiatives that stimulated entrepreneurism and small business creation led to drastically reduced unemployment. This subsequently expanded the taxpayer base, and also helped to reduce crime in areas with high unemployment. Among these were:

• The corporate tax rate was reduced from 35% to 21%, thanks to TCJA. This will likely be made permanent.
• TCJA currently requires R&D expenses to be amortized over a 5 year period. Eliminating the 5-year requirement to allow 100% deductions would accelerate innovation and reduce compliance burdens.
• Restoration of the 100% Bonus Depreciation for the full cost of qualifying capital investments will be a boon to entrepreneurs and small businesses.
• Section 199A deduction for the 20% Qualified Business Income deduction is another provision that should be made permanent. It accounts for the millions of small businesses that are pass-thru entities, such as S-Corps, sole proprietorships, and partnerships. 
• Changing of the Interest Deduction to be calculated based on EBITDA (Earnings Before Interest, Taxes, Deductions and Amortization) increases the deduction for companies that have a high debt level, due to cashflow and supply chain issues caused by events over the past 4 years.

New Proposals On the Table

Some of the additional proposals by President Trump that may become part of the tax code in the near future for businesses include:

• A further reduction of the corporate tax rate from 21% to 20%.
• In keeping with the America First ethos of bringing manufacturing back to US soil, President Trump has proposed dropping the corporate rate to 15% for US companies manufacturing their products in the US.
• Revival of DPAD – The Domestic Production Activities Deduction (DPAD) was eliminated in 2017, as a concession to Congressional Democrats. President Trump is considering restoring DPAD at a 28.5% rate, which would expand M&A activity and further stimulate domestic production. 

On the individual side, some of the more popular initiatives that President Trump has mentioned include:

• Elimination of tax on tips for service workers.
• Elimination of tax on overtime work and on Social Security benefits.
• Creation of itemized deduction for Automobile Loan interest. 
• Repeal of the Biden Administration’s Inflation Reduction Act, which ironically was a major stimulus of further inflation, through lack of accountability, spending abuse, and mandated increased reliance on Chinese manufacturing.
• A new levy of taxes on large private university endowments.

Resistance From Congress and the DOGE Factor

Many analysts writing about President Trump’s tax reform plans were expecting considerable resistance from Congress, especially in the House of Representatives, where the Republican majority margin difference is only +3 seats.  Opposition to any of President Trump’s previous plans have predominantly been knee-jerk reactions without substantive counter-argument. 

The appointment of Elon Musk to head the Department of Government Efficiency (DOGE) has uncovered numerous spending abuses of taxpayer funds by Congress and many bureaucrats that run into hundreds of billions, and possibly into trillions of dollars. The discovery of USAID funds paid to terrorists and wasteful overseas spending initiatives on politically woke entertainment projects and the like have generated enormous public anger and outcry. 

As a result, calls for additional audits of government entities, such as the Board of Education and the Pentagon, may unveil further spending abuses and unaccountability. Such news will likely boost the growing support for tax reforms that President Trump has already proposed. With several members of Congress already starting to cave to a public angered by lies from their representatives in D.C., popular support may very well help President Trump’s forthcoming tax initiatives pass congressional impasses.