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There will be a major tax bill in 2025, as both Republicans and Democrats contend with the looming expiration of most of the current tax code’s individual and estate tax rules. Scheduled for expiration at the end of 2025 are income and capital gains tax rates for individuals as well as the current $12+ million exemption from the estate tax. Tax policy will play a key role in the debate, but so will revenue—the cost of extending the 2017 rules is astronomical. And lawmakers are already looking at other tax issues—like, for example, the corporate tax rate—that are not scheduled to expire but are intrinsic to both tax policy and revenue issues.

Among the key issues that will be live in the tax bill debate are:

  • Individual, capital gains, and corporate tax rates
  • Whether to tax wealthy individuals on the annual gains on their investments (taxation of unrealized gain), even if those investments are not sold
  • Whether to extend, with or without modification, the section 199A deduction for qualifying noncorporate business income
  • A slew of estate and gift tax rules, including the size of the per person exemption from estate tax liability and the estate tax rate
  • The tax-free treatment of many employer-provided benefits—things like tax-free employer-provided health insurance and employer and employee contributions to retirement plans

Currently, both President Biden and lawmakers from both parties say they will not allow tax increases to be imposed on income of less than $400,000. But new tax rules that impact income above that level could also have trickle-down impact on lower income levels. Think about the administrative cost to employers of tax rules that differ for high-paid versus lower-paid employees, and the possibility that income limits can relatively easily be adjusted (or fail to adjust, for example for inflation) in future tax legislation.

Revenue will also play a key role. Recent Congressional Budget Office (CBO) and Joint Committee on Tax (JCT) estimates put the cost of extending the 2017 tax law at $3.8 trillion or more. With a growing federal deficit and debt—projected to exceed $3 trillion in the near future—there will be serious discussion of offsets—tax rule changes aimed at raising revenue as well as adjusting tax policy. So, tax rules that are not scheduled to expire at the end of next year are quite likely to also be part of the debate.

Congress is already gearing up for this debate. The House Ways & Means Committee Republicans have formed ten “tax teams,” smaller subgroups of the committee’s GOP members that are delving deep into specific areas of the tax code. Private sector interests are already hitting the Hill to defend existing rules (e.g., the section 199A deduction for qualifying noncorporate business income). Lawmakers from both parties have begun to educate themselves on both the tax and fiscal policy that will shape the debate and determine the outcome.

Prospects: The 2025 tax bill is as certain as anything can be – no one wants the 2017 tax rules to fully expire, and Congressional action is necessary to prevent that. NAIFA—and every other interest group in the country—is and will remain deeply engaged now and throughout the rest of this year and into next year.

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.