September 25, 2024 • 14 mins
What do the contrasting tax proposals of Vice President Kamala Harris and former President Donald Trump mean for Americans as the 2024 election approaches?
In this episode, we dive into the Tax Foundation's modeling of both candidates' plans, shedding light on how these proposals could impact Americans.
Joining Kyle Hulehan is Erica York, Senior Economist and Research Director. Together, they'll chat about the major economic implications of each candidate’s proposals, from national debt to economic growth.
Links:
https://taxfoundation.org/research/all/federal/kamala-harris-tax-plan-2024/
https://taxfoundation.org/research/all/federal/donald-trump-tax-plan-2024/
https://taxfoundation.org/research/federal-tax/2024-tax-plans/
https://taxfoundation.org/blog/trump-overtime-tax-exemption/
Follow us!
https://twitter.com/TaxFoundation
https://twitter.com/deductionpod
Support the show
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Kyle Hulehan (00:00):
Hello and welcome to the deduction a tax
(00:02):
foundation podcast I'm your hostkyle holohan and we are back
again today with anotherelection episode with my co host
erica york Senior economist andresearch director here at the
tax foundation.
You guys are all familiar withher at this point And I want to
just dive right in and Rememberguys, these are just these 10
minute episodes.
We're trying to speed everythingup to get you everything you
(00:24):
need to know about the electionand taxes right now.
And you know, kicking things offwith our segment that we call
what's in the news and DonaldTrump is really keeping us on
our toes here at the taxfoundation with a lot of
different proposals, which Idon't mind.
I, I simply would ask that maybehe keep it to like announcements
(00:46):
on a Monday instead of a Friday,but that's just a personal
thing.
Um, so Donald Trump recentlycame out with, uh, an overtime
pay exemption idea, and thatcould reshape.
You know, some of the labormarkets or government revenue,
uh, Erica, could you explainthis to us
Erica York (01:04):
Yeah, so Trump came out with an idea on a Friday, I
think, to exempt overtime fromall taxes.
Now, presumably, this would beincome taxes as well as payroll
taxes, but he hasn't totallyspecified that, but has hinted
toward that.
Now, if we think about who earnsall Overtime pay, um, you might
think just, you know, a lot ofpeople work overtime, but there
(01:26):
are actually some pretty complexregulations that require certain
employers for employees incertain situations to be paid
time and a half for any hoursworked over 40 hours a week.
These are primarily hourlyemployees, so that's where we
see.
Most overtime pay happening, butit's true for some salaried
workers as well.
Now, if we just took currentamounts of overtime pay, we can
(01:49):
pull this from the Bureau oflabor statistics.
They estimate that roughly 3percent of employer compensation
costs go toward overtime pay, orabout 4%, a little more than 4
percent of salaries and wagesare overtime pay.
If we said, okay, that amountright there no longer faces
income and payroll tax.
Okay.
That would reduce federalrevenue by about one and a half
(02:11):
trillion dollars over 10 yearsthe budget window that congress
uses But like I said earlier,you know, most salaried
employees right now don't gettime and a half pay There would
be a really big incentive forsalaried workers or hourly
workers who don't currentlyqualify for that To work with
their employer and get into anarrangement where they would
(02:33):
qualify for overtime pay We'veestimated that if If something
like that took place, um, justrecharacterization of pay that
the cost on this could nearlydouble to about 3 trillion over
a decade.
And that's before figuring inany additional behavioral
estimates like workers on themargin working a couple more
hours of overtime because theyknow that that would be totally
(02:55):
tax free.
So that would increase the costeven further.
What this adds up to is a veryexpensive tax cut.
That primarily encourages gamingand recharacterizing how you
earn your income.
Even though it would have somepositive economic benefit,
increasing hours worked to someextent, I think the biggest
effect here would be the gaming,and it would be a very big cost
(03:19):
too.
So this is another tax policyproposal on top of trillions of
others that doesn't add up to areally impressive economic
effect.
Kyle Hulehan (03:27):
is a lot of money.
And sometimes I just feel likethese ideas are not often as
serious as we would like them oras plausible as we would like
them to be.
And, you know, we're on DonaldTrump right now.
So we might as well just diveall the way in recently.
We've.
We've modeled some of DonaldTrump's proposals, you know,
more holistically.
Um, and so I, I want to diveinto that.
(03:48):
So according to the taxfoundation's model, you know,
could his ideas on the economy,what do they mean for national
debt?
You know, are, are we tradingone challenge, you know, for
another, or is there some sortof silver lining in some of his
proposals that we modeled?
Erica York (04:03):
So we published this analysis before the overtime tax
idea, but I think it fits inwith the themes of what else
we've seen promised from Trump.
And first, that's permanence forthe 2017 tax law that he signed
when he was president then thatis expiring at the end of next
year.
So permanence for that, theindividual provisions, the state
(04:25):
tax provisions and the businessprovisions would cost on its own
about 4.
2 trillion.
And then from there, we've seenTrump outline additional tax cut
promises, whether it's the ideaof no tax on tips, no tax on
overtime, no tax on SocialSecurity.
That adds trillions more to thecost, and then to offset that
(04:46):
cost, he has promised a rollbackof the green energy tax credits
that were in the inflationreduction act as well as more
distortionary taxes on importsor tariffs, the potential of a
60 percent tariff on everythingfrom China.
Or 10 to up to 20 percenttariffs on absolutely everything
we import.
(05:07):
The net effect of that wouldstill be higher deficits.
Um, the clawbacks of the creditsand the promises of tariffs only
go a little way and actuallyoffsetting the cost of the tax
cuts.
So if you take everything thatTrump has promised, we estimate
a 10% Total budgetary impact ofa deficit increase of nearly 4
(05:30):
Trillion dollars over the 10year budget window.
But then when we look at theeconomics of this, if we factor
in the tariffs, the foreignretaliation from foreign
governments who are very likelyto impose tariffs of their own
on U.
S.
exports in response to thetariffs that we put on imports
from foreign countries, thenegative impact of that
(05:53):
threatens to offset all theeconomic benefit of the tax
cuts.
Now, we hadn't modeled theovertime tax exemption yet, but
as I mentioned earlier, While itis a big tax cut, it's a big tax
cut because it invites a lot ofgaming.
Um, so I wouldn't anticipatethose numbers to shift that much
from the situation that we have,which is that an all out trade
(06:15):
war could offset the economicgains from tax cuts.
Kyle Hulehan (06:19):
So we just showing this chart and its metrics are
in GDP.
Could you just maybe for ouraudience briefly explain why GDP
is important?
It's kind of a, I feel like thispeople are saying GDP all the
time and no one really knowswhat it means.
Erica York (06:33):
Yeah.
GDP stands for gross domesticproduct.
That's a measure of the finalvalue of the goods and services
that we produce in the UnitedStates in a given year.
So this is essentially a measureof how much output we have, how
much stuff are we producing,which in turn is how we earn our
income.
So it's also a measure ofwellbeing in the sense of, this
is how much income we'reearning.
(06:53):
And when that number goes up,um, the economy is growing,
there are more job opportunitieswith higher wages, incomes go
up.
If that number goes down, we'reproducing less stuff and we have
lower incomes.
So when we show in our modelingthat a trade war could offset
the improved incentives fromlower taxes, that's a very
serious thing that's sayingthat, hey, we could all be
(07:16):
poorer as a result of thesepolicies altogether.
Kyle Hulehan (07:20):
I see.
You know, we're trying to keepthings very brief here.
So to kind of like transitionnow, we're trying to do a little
bit of a compare contrastepisode here with, Trump and
Kamala Harris.
So when we're talking about vicepresident Kamala Harris, we also
modeled her plans and what she'sdelivered to us.
Uh, could you maybe talk about,you know, what her tax policies
(07:42):
maybe mean for incomedistribution and economic growth
for us?
Erica York (07:46):
Yeah, so we have estimated that the effect of her
proposed tax increases would beto shrink the size of the long
run economy by about 2%.
Um, that's pretty impressive.
Because she primarily relies onsome of the most harmful types
of taxes to raise revenue forher spending and tax credit
plans.
Um, whether we're talking aboutthe higher tax rate on
(08:08):
corporations, which affects theeconomy.
Business investment, or we'retalking about higher tax rates
on individual income on capitalgains income, raising those
marginal tax rates on differenttypes of income comes with a
pretty negative trade off interms of economic growth.
And so that's why we We estimatethat 2 percent drop in gross
(08:29):
domestic product because ofthose higher marginal tax rates.
Now those higher taxes alsoraise quite a bit of revenue.
So if we look at just the taxside of Harris's plans alone
with the higher taxes, the taxcuts for certain groups and the
tax credits, we find that itactually raises revenue over
that 10 year window, about 1.
(08:51):
7 trillion.
But then this is where theunknowns come in.
Um, we've also seen Harrispromise a lot of new spending
for her opportunity economyideas.
We have seen her hint at wantingto continue the expiring tax
cuts.
Um, and we've estimated justputting rough dollar figures on
those that if the tax cuts areextended for people making under
(09:13):
400, 000 and that's not offsetby higher taxes on other
taxpayers elsewhere.
And if she just adopts the roughspending proposals that we saw
in Biden's budget this year,that eats up all of that higher
revenue and puts us into deficitincreasing territory.
With a deficit of about one anda half trillion dollars over 10
(09:33):
years.
So depending on how exactly shefeels in those details, we could
see, um, a small increase in thedeficit or, you know, maybe
close to revenue neutral plan,but still that net negative in
terms of economic output,
Kyle Hulehan (09:48):
It seems like to me, there's some shortcomings in
both of these plans.
You know, Trump might be tradinglike one good thing for one bad
thing.
And there might be some, someshortcoming in terms of, of
economic growth for KamalaHarris, you know, what do these
tax plans maybe offer?
Is there, you know, a viablepath forward for, for some of
(10:10):
these plans that they have whilealso considering national debt
and, and government revenue isone of these plans like.
Better for the American peoplethan the other.
Erica York (10:20):
I don't think either have offered a compelling vision
of.
Fiscal responsibility or abetter structured tax code.
That's simpler that encouragesinvestment and work.
Unfortunately, we're choosingfrom two, what I would say are
bad plans.
Um, that still leave a lot ofquestions unanswered.
Some of Trump's policies wouldmove in the right direction,
(10:43):
like permanence for bonusdepreciation and R and D
expensing.
But then layered on top of that,we have policies that go in the
opposite direction of the 2017tax reform that would riddle the
tax base with preferences thatwould make it much more complex
and more unfair, not to mentiontariffs, which would invite
foreign retaliation and be evenmore distortionary.
(11:04):
And then when we look at Harris,she's relying on some of the
most economically harmful typesof taxes to raise revenue for
her spending and tax creditproposals.
So I wouldn't recommend eitherpath.
I'd say we all need to go backto the drawing board.
Tax policy has to go throughCongress.
Maybe Congress can shape upthese plans a little bit better
(11:24):
so that the end result issomething that's not quite so
deficit increasing and not quiteso economically harmful.
Kyle Hulehan (11:31):
And quite honestly, I think Erica and I
have talked a lot about this.
And even on episodes beforethese, these video episodes that
we're doing here on YouTube,which you can check out.
Um, I think before that therewas even, you know, a lot of
discussion that these ideasweren't serious enough and the
American people, I think,deserve a little bit better on
these fronts.
They deserve a good plan.
(11:51):
And unfortunately, that's not.
Seemingly what either of themare delivering right now, um, to
keep this moving, we need to goon to the audience questions.
And we had a really greatquestion from our man, Ahmaud.
Um, Ahmaud asks, uh, I keephearing that some tax cuts are
expiring.
What does that mean?
Erica York (12:10):
The 2017 Tax Cuts and Jobs Act cut individual
income taxes by lowering rates,widening brackets, doubling the
child tax credit, increasing thestandard deduction, and paying
for that in part by placinglimitations on itemized
deductions.
Which simplified the tax systemoverall, but it only made those
changes temporarily.
(12:31):
They were scheduled to sunset atthe end of 2025, meaning in
2026, the tax system revertsback to what it used to be.
So rates go higher, the standarddeduction shrinks, the child tax
credit halves, and most of thoseother changes go away too.
We've estimated at TaxFoundation, if that expiration
is allowed to occur, about 62percent of taxpayers would see
(12:54):
higher taxes in 2026, becausethat 2017 tax law reduced taxes
for taxpayers across the entireincome spectrum on average.
Not only would taxpayers seehigher taxes in 2026, but the
system would be a lot morecomplicated, too.
That's because the TCGA, throughthe higher standard deduction
(13:15):
and fewer itemized deductions,actually simplified the tax
filing process for taxpayers,allowing them to take that
streamlined standard deductionrather than going through the
process of itemizing.
The TCGA also reduced the biteof the alternative minimum tax,
which is a parallel tax systemthat millions of taxpayers used
to have to file under and paytaxes under whichever system was
(13:37):
higher, the AMT or the ordinarysystem.
The TCGA significantly increasedthe exemption amounts for the
AMT, meaning millions fewertaxpayers had to deal with that
parallel tax system.
That would come back in 2026 ifthe TCGA is allowed to fully
expire.
Kyle Hulehan (13:54):
Erica, thank you for sharing your expertise
today, and I appreciate youbeing on the show.
Erica York (13:58):
Thanks, Kyle.
Kyle Hulehan (13:58):
And before we sign off, I just want to let you guys
know if you have any burningquestions, uh, on taxes and the
election, you know, we're goingto continue to discuss all of
this and continue doing theseelection insight episodes.
So you can email us at podcastat tax foundation.
org, or you will find us onTwitter at deduction pod.
Thank you for listening.
Hello and welcome to the deduction a tax
(00:02):
foundation podcast I'm your hostkyle holohan and we are back
again today with anotherelection episode with my co host
erica york Senior economist andresearch director here at the
tax foundation.
You guys are all familiar withher at this point And I want to
just dive right in and Rememberguys, these are just these 10
minute episodes.
We're trying to speed everythingup to get you everything you
(00:24):
need to know about the electionand taxes right now.
And you know, kicking things offwith our segment that we call
what's in the news and DonaldTrump is really keeping us on
our toes here at the taxfoundation with a lot of
different proposals, which Idon't mind.
I, I simply would ask that maybehe keep it to like announcements
(00:46):
on a Monday instead of a Friday,but that's just a personal
thing.
Um, so Donald Trump recentlycame out with, uh, an overtime
pay exemption idea, and thatcould reshape.
You know, some of the labormarkets or government revenue,
uh, Erica, could you explainthis to us
Erica York (01:04):
Yeah, so Trump came out with an idea on a Friday, I
think, to exempt overtime fromall taxes.
Now, presumably, this would beincome taxes as well as payroll
taxes, but he hasn't totallyspecified that, but has hinted
toward that.
Now, if we think about who earnsall Overtime pay, um, you might
think just, you know, a lot ofpeople work overtime, but there
(01:26):
are actually some pretty complexregulations that require certain
employers for employees incertain situations to be paid
time and a half for any hoursworked over 40 hours a week.
These are primarily hourlyemployees, so that's where we
see.
Most overtime pay happening, butit's true for some salaried
workers as well.
Now, if we just took currentamounts of overtime pay, we can
(01:49):
pull this from the Bureau oflabor statistics.
They estimate that roughly 3percent of employer compensation
costs go toward overtime pay, orabout 4%, a little more than 4
percent of salaries and wagesare overtime pay.
If we said, okay, that amountright there no longer faces
income and payroll tax.
Okay.
That would reduce federalrevenue by about one and a half
(02:11):
trillion dollars over 10 yearsthe budget window that congress
uses But like I said earlier,you know, most salaried
employees right now don't gettime and a half pay There would
be a really big incentive forsalaried workers or hourly
workers who don't currentlyqualify for that To work with
their employer and get into anarrangement where they would
(02:33):
qualify for overtime pay We'veestimated that if If something
like that took place, um, justrecharacterization of pay that
the cost on this could nearlydouble to about 3 trillion over
a decade.
And that's before figuring inany additional behavioral
estimates like workers on themargin working a couple more
hours of overtime because theyknow that that would be totally
(02:55):
tax free.
So that would increase the costeven further.
What this adds up to is a veryexpensive tax cut.
That primarily encourages gamingand recharacterizing how you
earn your income.
Even though it would have somepositive economic benefit,
increasing hours worked to someextent, I think the biggest
effect here would be the gaming,and it would be a very big cost
(03:19):
too.
So this is another tax policyproposal on top of trillions of
others that doesn't add up to areally impressive economic
effect.
Kyle Hulehan (03:27):
is a lot of money.
And sometimes I just feel likethese ideas are not often as
serious as we would like them oras plausible as we would like
them to be.
And, you know, we're on DonaldTrump right now.
So we might as well just diveall the way in recently.
We've.
We've modeled some of DonaldTrump's proposals, you know,
more holistically.
Um, and so I, I want to diveinto that.
(03:48):
So according to the taxfoundation's model, you know,
could his ideas on the economy,what do they mean for national
debt?
You know, are, are we tradingone challenge, you know, for
another, or is there some sortof silver lining in some of his
proposals that we modeled?
Erica York (04:03):
So we published this analysis before the overtime tax
idea, but I think it fits inwith the themes of what else
we've seen promised from Trump.
And first, that's permanence forthe 2017 tax law that he signed
when he was president then thatis expiring at the end of next
year.
So permanence for that, theindividual provisions, the state
(04:25):
tax provisions and the businessprovisions would cost on its own
about 4.
2 trillion.
And then from there, we've seenTrump outline additional tax cut
promises, whether it's the ideaof no tax on tips, no tax on
overtime, no tax on SocialSecurity.
That adds trillions more to thecost, and then to offset that
(04:46):
cost, he has promised a rollbackof the green energy tax credits
that were in the inflationreduction act as well as more
distortionary taxes on importsor tariffs, the potential of a
60 percent tariff on everythingfrom China.
Or 10 to up to 20 percenttariffs on absolutely everything
we import.
(05:07):
The net effect of that wouldstill be higher deficits.
Um, the clawbacks of the creditsand the promises of tariffs only
go a little way and actuallyoffsetting the cost of the tax
cuts.
So if you take everything thatTrump has promised, we estimate
a 10% Total budgetary impact ofa deficit increase of nearly 4
(05:30):
Trillion dollars over the 10year budget window.
But then when we look at theeconomics of this, if we factor
in the tariffs, the foreignretaliation from foreign
governments who are very likelyto impose tariffs of their own
on U.
S.
exports in response to thetariffs that we put on imports
from foreign countries, thenegative impact of that
(05:53):
threatens to offset all theeconomic benefit of the tax
cuts.
Now, we hadn't modeled theovertime tax exemption yet, but
as I mentioned earlier, While itis a big tax cut, it's a big tax
cut because it invites a lot ofgaming.
Um, so I wouldn't anticipatethose numbers to shift that much
from the situation that we have,which is that an all out trade
(06:15):
war could offset the economicgains from tax cuts.
Kyle Hulehan (06:19):
So we just showing this chart and its metrics are
in GDP.
Could you just maybe for ouraudience briefly explain why GDP
is important?
It's kind of a, I feel like thispeople are saying GDP all the
time and no one really knowswhat it means.
Erica York (06:33):
Yeah.
GDP stands for gross domesticproduct.
That's a measure of the finalvalue of the goods and services
that we produce in the UnitedStates in a given year.
So this is essentially a measureof how much output we have, how
much stuff are we producing,which in turn is how we earn our
income.
So it's also a measure ofwellbeing in the sense of, this
is how much income we'reearning.
(06:53):
And when that number goes up,um, the economy is growing,
there are more job opportunitieswith higher wages, incomes go
up.
If that number goes down, we'reproducing less stuff and we have
lower incomes.
So when we show in our modelingthat a trade war could offset
the improved incentives fromlower taxes, that's a very
serious thing that's sayingthat, hey, we could all be
(07:16):
poorer as a result of thesepolicies altogether.
Kyle Hulehan (07:20):
I see.
You know, we're trying to keepthings very brief here.
So to kind of like transitionnow, we're trying to do a little
bit of a compare contrastepisode here with, Trump and
Kamala Harris.
So when we're talking about vicepresident Kamala Harris, we also
modeled her plans and what she'sdelivered to us.
Uh, could you maybe talk about,you know, what her tax policies
(07:42):
maybe mean for incomedistribution and economic growth
for us?
Erica York (07:46):
Yeah, so we have estimated that the effect of her
proposed tax increases would beto shrink the size of the long
run economy by about 2%.
Um, that's pretty impressive.
Because she primarily relies onsome of the most harmful types
of taxes to raise revenue forher spending and tax credit
plans.
Um, whether we're talking aboutthe higher tax rate on
(08:08):
corporations, which affects theeconomy.
Business investment, or we'retalking about higher tax rates
on individual income on capitalgains income, raising those
marginal tax rates on differenttypes of income comes with a
pretty negative trade off interms of economic growth.
And so that's why we We estimatethat 2 percent drop in gross
(08:29):
domestic product because ofthose higher marginal tax rates.
Now those higher taxes alsoraise quite a bit of revenue.
So if we look at just the taxside of Harris's plans alone
with the higher taxes, the taxcuts for certain groups and the
tax credits, we find that itactually raises revenue over
that 10 year window, about 1.
(08:51):
7 trillion.
But then this is where theunknowns come in.
Um, we've also seen Harrispromise a lot of new spending
for her opportunity economyideas.
We have seen her hint at wantingto continue the expiring tax
cuts.
Um, and we've estimated justputting rough dollar figures on
those that if the tax cuts areextended for people making under
(09:13):
400, 000 and that's not offsetby higher taxes on other
taxpayers elsewhere.
And if she just adopts the roughspending proposals that we saw
in Biden's budget this year,that eats up all of that higher
revenue and puts us into deficitincreasing territory.
With a deficit of about one anda half trillion dollars over 10
(09:33):
years.
So depending on how exactly shefeels in those details, we could
see, um, a small increase in thedeficit or, you know, maybe
close to revenue neutral plan,but still that net negative in
terms of economic output,
Kyle Hulehan (09:48):
It seems like to me, there's some shortcomings in
both of these plans.
You know, Trump might be tradinglike one good thing for one bad
thing.
And there might be some, someshortcoming in terms of, of
economic growth for KamalaHarris, you know, what do these
tax plans maybe offer?
Is there, you know, a viablepath forward for, for some of
(10:10):
these plans that they have whilealso considering national debt
and, and government revenue isone of these plans like.
Better for the American peoplethan the other.
Erica York (10:20):
I don't think either have offered a compelling vision
of.
Fiscal responsibility or abetter structured tax code.
That's simpler that encouragesinvestment and work.
Unfortunately, we're choosingfrom two, what I would say are
bad plans.
Um, that still leave a lot ofquestions unanswered.
Some of Trump's policies wouldmove in the right direction,
(10:43):
like permanence for bonusdepreciation and R and D
expensing.
But then layered on top of that,we have policies that go in the
opposite direction of the 2017tax reform that would riddle the
tax base with preferences thatwould make it much more complex
and more unfair, not to mentiontariffs, which would invite
foreign retaliation and be evenmore distortionary.
(11:04):
And then when we look at Harris,she's relying on some of the
most economically harmful typesof taxes to raise revenue for
her spending and tax creditproposals.
So I wouldn't recommend eitherpath.
I'd say we all need to go backto the drawing board.
Tax policy has to go throughCongress.
Maybe Congress can shape upthese plans a little bit better
(11:24):
so that the end result issomething that's not quite so
deficit increasing and not quiteso economically harmful.
Kyle Hulehan (11:31):
And quite honestly, I think Erica and I
have talked a lot about this.
And even on episodes beforethese, these video episodes that
we're doing here on YouTube,which you can check out.
Um, I think before that therewas even, you know, a lot of
discussion that these ideasweren't serious enough and the
American people, I think,deserve a little bit better on
these fronts.
They deserve a good plan.
(11:51):
And unfortunately, that's not.
Seemingly what either of themare delivering right now, um, to
keep this moving, we need to goon to the audience questions.
And we had a really greatquestion from our man, Ahmaud.
Um, Ahmaud asks, uh, I keephearing that some tax cuts are
expiring.
What does that mean?
Erica York (12:10):
The 2017 Tax Cuts and Jobs Act cut individual
income taxes by lowering rates,widening brackets, doubling the
child tax credit, increasing thestandard deduction, and paying
for that in part by placinglimitations on itemized
deductions.
Which simplified the tax systemoverall, but it only made those
changes temporarily.
(12:31):
They were scheduled to sunset atthe end of 2025, meaning in
2026, the tax system revertsback to what it used to be.
So rates go higher, the standarddeduction shrinks, the child tax
credit halves, and most of thoseother changes go away too.
We've estimated at TaxFoundation, if that expiration
is allowed to occur, about 62percent of taxpayers would see
(12:54):
higher taxes in 2026, becausethat 2017 tax law reduced taxes
for taxpayers across the entireincome spectrum on average.
Not only would taxpayers seehigher taxes in 2026, but the
system would be a lot morecomplicated, too.
That's because the TCGA, throughthe higher standard deduction
(13:15):
and fewer itemized deductions,actually simplified the tax
filing process for taxpayers,allowing them to take that
streamlined standard deductionrather than going through the
process of itemizing.
The TCGA also reduced the biteof the alternative minimum tax,
which is a parallel tax systemthat millions of taxpayers used
to have to file under and paytaxes under whichever system was
(13:37):
higher, the AMT or the ordinarysystem.
The TCGA significantly increasedthe exemption amounts for the
AMT, meaning millions fewertaxpayers had to deal with that
parallel tax system.
That would come back in 2026 ifthe TCGA is allowed to fully
expire.
Kyle Hulehan (13:54):
Erica, thank you for sharing your expertise
today, and I appreciate youbeing on the show.
Erica York (13:58):
Thanks, Kyle.
Kyle Hulehan (13:58):
And before we sign off, I just want to let you guys
know if you have any burningquestions, uh, on taxes and the
election, you know, we're goingto continue to discuss all of
this and continue doing theseelection insight episodes.
So you can email us at podcastat tax foundation.
org, or you will find us onTwitter at deduction pod.
Thank you for listening.
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