December 23, 2024 • 9 mins
What do you need to know to prepare for the upcoming tax year?
Joining Kyle Hulehan is Erica York, Senior Economist and Research Director. In this episode, they gear you up for 2025 by discussing key tax dates to mark on your calendar and the latest news affecting tax policy. Erica also shares insights from her recent congressional testimony on tariffs.
Links:
https://taxfoundation.org/testimony/t...
https://taxfoundation.org/blog/trump-...
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Kyle Hulehan (00:00):
Hello and welcome to the Deduction Attacks
(00:02):
Foundation podcast.
I'm your host, Kyle Houlahan,and today we are back again with
our co-host, Erica York, senioreconomist and research director.
Erica, how are you doing today?
Erica York (00:13):
Hey Kyle, doing well.
Last work week of the year.
How are you?
Kyle Hulehan (00:16):
I'm good.
Excited for a little bit of abreak for us, uh, and a
hopefully a little bit of breakfor everyone else.
Uh, you know, it's the Christmasseason.
That means the new year is iscoming up very soon.
So today's a little bit of aprimer for 2025.
We wanna let people know.
What dates they should be awareof what's coming with taxes in
2025.
So before we get into that, youknow, we had the, what's in the
(00:37):
news segment, what's going onright now that people should be
aware of, uh, before we get towhat's coming in 2025,
Erica York (00:44):
right now?
It's just kind of like a lot ofrumors and pre negotiations
ahead of what Congress will beconsidering next year, what
timeline they're going to beworking on.
We're seeing some disagreement,um, between house lawmakers and
Senate lawmakers, as far as whatthey want to prioritize first.
Um, so they'll have to get thatall sorted out, but it's just
giving us an idea of kind of howfraught next year is going to be
(01:07):
with debates over tax, debatesover president.
Elect Trump's other campaignpromise policies and how that
actually gets put intolegislation.
Kyle Hulehan (01:16):
Then.
What are some of those datesthat people should be aware of
Erica York (01:21):
One big one that's going to come up right away in
the new year is the suspensionor the expiration of the
suspension of the debt limitceiling.
So this places a cap on how muchessentially the U S government
can borrow.
And if that expires, then nomore new borrowing can take
place.
The treasury department has somespecial measures they can do to
continue making payments asneeded, but ultimately it means
(01:44):
Congress is going to have tolift the debt ceiling again.
And that's coming like firstthing in January when they get
back to town.
Um, of course, then we have theinauguration of president Trump
coming up in January.
And from, from then it's reallyup to Congress, how quickly
things move.
You know, there's been talkabout doing a reconciliation
bill, um, within the firsthundred days, there's also been
(02:05):
talk about two reconciliationbills done next year.
One to address tax, one toaddress other policies, um, the
dates on those, you know,there's going to be.
Urgency associated with that,but with big moving pieces of
legislation, like what we'reexpecting to see in 2025, it'll
be really hard to get that doneearly.
So I would expect we see thatprocess stretch out to the
(02:28):
summer, maybe even to the fall.
Of course, the big deadline thatmatters on tax is at the end of
2025.
So after December 31st nextyear, All of those individual
provisions from the TCJA expire,um, the estate tax provisions
expire and a several businesstax provisions become tighter or
get a little bit worse.
And so ultimately that's thereal deadline for when tax needs
(02:52):
to be wrapped up ideally beforethat a little bit so people can
plan and not have a, you know,surprise about what their tax is
2026.
Kyle Hulehan (03:01):
and you know, maybe we've talked about this
quite a bit We've talked aboutyou know, TCJA expiring.
Could you maybe give people thelike too long didn't read why
this is actually important
Erica York (03:10):
So back in 2017, Congress passed a tax reform
bill.
It made some permanent changes,but because it used the budget
reconciliation process, whichplaces constraints on what you
can do, um, it made temporarytax cuts for individuals.
And so it cut taxes for peopleacross the income spectrum, it
lowered tax rates, increased thechild tax credit, lots of moving
(03:31):
pieces.
And all of those moving piecesrevert back to prior law after
the end of this year, becausethey did those temporarily, if
that expiration is allowed tooccur, we've estimated that more
than 62 percent of taxpayerswould see tax increases.
If you take the individual taxcuts that are expiring, plus the
business tax cuts that areworsening, um, the average tax
(03:53):
increase would be about 2800dollars.
So a pretty big jump in taxesscheduled to occur if Congress
does nothing.
It's not likely that Congress isgoing to let that happen, but
it's also really uncertain whatexactly they're going to do.
So that's why this is one of thevery big legislative issues for
2025.
Kyle Hulehan (04:11):
Yeah, so Erica, I mean we've we've hit this topic
quite a bit over over the Arelike eight or ten episodes that
we've done together.
Uh, you recently testified ontariffs Could you tell people a
little bit about that?
Erica York (04:27):
Yeah.
So I was invited to testifybefore the joint economic
committee.
They're having a hearing ontariffs, how they affect costs,
how they affect prices, how theyaffect manufacturing.
And so my testimony is focusingon what we know from the 2018,
2019 trade war.
Which is that the tariffsimposed under president Trump's
first term shrunk the U Seconomy.
(04:49):
They raise costs, both forbusinesses that buy inputs from
abroad and for consumers thateither buy consumer goods from
abroad or buy products made inthe U S with U S tariffs.
foreign inputs as part of thecomposition of that good.
Um, so those costs went upbecause us import prices went
up.
Uh, we saw a decline inmanufacturing jobs, both from
(05:12):
those higher input costs andfrom retaliation that other
countries put on us exports inresponse to the tariffs we
imposed.
So overall net negative outcomesfor Workers for farmers for
manufacturers for the U.
S.
economy as a whole, and, youknow, we have a lot of tax
policy reforms that could be onthe table that would meet these
(05:35):
goals that tariffs are supposedto do, but don't actually so
whether it's, you know, boostingmanufacturing productivity,
increasing incentives to investin the U.
S.
or locate production in the U.
S.
There's a lot that can be donein a simple and neutral way in
the tax code, like fullexpensing for capital
investment.
Appreciate it.
Full expensing for research anddevelopment, um, that do not
(05:56):
come with all of those downsidesthat tariffs come with and that
actually would result in thesebetter outcomes.
And so my testimony focused onkind of those two points, the
negatives of tariffs.
Um, we know they don't work andhere are some tax policy ideas
that we do know work, um, andcould better achieve these
goals.
Kyle Hulehan (06:12):
I you know, I I feel like sometimes this stuff
can be so elusive or it seems alittle abstract But correct me
if i'm wrong.
I I think it was It was washersor dryers or something that the
price of tariffs actuallyaffected like something people
are buying in their everydaylives.
This isn't like, you know, metalor building or steel, which were
things that were affected, Ibelieve, but, you know, there
(06:33):
are things in people's reallives that they will be
purchasing, purchasing thatcould be affected by tariffs.
Erica York (06:37):
Absolutely.
Yeah.
The first Trump administrationput tariffs on washing machines
and Big surprise, the price ofwashing machines that you buy at
the store went up.
And, um, one study found thateven the price of dryers, which
were not subject to tariffs, butare sold often in a package with
washers, went up too.
So not only did you have to paymore for your washer, Because
(06:59):
you had to pay more for yourwasher that gave companies room
to make.
You also pay more for yourdryer.
And so consumer costs went up,um, across the economy by, by
billions.
Um, now you'll hear tariffproponents say, yeah, but this
resulted in us saving a fewjobs.
But if you look at how muchconsumers had to pay to save a
job, we paid more than theperson.
(07:20):
Working in that saved job wasactually earning, which just
shows how much economic loss isoccurring for us to pay so much
more to save one job, ratherthan for us to look at reforms
that would boost productivity,boost these growth incentives in
a way that grows the economy,rather than that, just
redistributing income fromconsumers to protected sectors.
(07:42):
And, you know, if you look at.
One of the complicating factorshere that makes it hard to
produce washing machines in theUnited States is that we place
tariffs on steel, which are oneof the things that you have to
have access to to make a washingmachine.
So we're increasing the cost ofsteel for the companies, um,
which makes it even harder toproduce, which again adds to the
ultimate price that consumerspay.
(08:02):
So tariffs are a really, um,really bad tool for, for the
goals that proponents want toachieve with them.
Kyle Hulehan (08:09):
Yeah.
So we just, we just couldn'tfinish the year without talking
about tariffs.
A little bit more, uh, Erica,it's been really great doing our
podcast this year.
We will continue into 2025.
We're going to cover everythingthat's going on in taxes.
It's going to be a very, verybig year.
Thank you for being on the showtoday with us.
Erica York (08:27):
Yeah.
Thanks, Kyle.
And happy holidays and happy newyear to everybody.
Kyle Hulehan (08:30):
Yes.
Happy holidays, everyone.
And before we sign off, asalways, if you have any burning
questions on taxes, you can sendthem our way via email to
podcast at tax foundation.
org, or you can slide into ourDMS at deduction pod on Twitter.
Thanks for listening.
Hello and welcome to the Deduction Attacks
(00:02):
Foundation podcast.
I'm your host, Kyle Houlahan,and today we are back again with
our co-host, Erica York, senioreconomist and research director.
Erica, how are you doing today?
Erica York (00:13):
Hey Kyle, doing well.
Last work week of the year.
How are you?
Kyle Hulehan (00:16):
I'm good.
Excited for a little bit of abreak for us, uh, and a
hopefully a little bit of breakfor everyone else.
Uh, you know, it's the Christmasseason.
That means the new year is iscoming up very soon.
So today's a little bit of aprimer for 2025.
We wanna let people know.
What dates they should be awareof what's coming with taxes in
2025.
So before we get into that, youknow, we had the, what's in the
(00:37):
news segment, what's going onright now that people should be
aware of, uh, before we get towhat's coming in 2025,
Erica York (00:44):
right now?
It's just kind of like a lot ofrumors and pre negotiations
ahead of what Congress will beconsidering next year, what
timeline they're going to beworking on.
We're seeing some disagreement,um, between house lawmakers and
Senate lawmakers, as far as whatthey want to prioritize first.
Um, so they'll have to get thatall sorted out, but it's just
giving us an idea of kind of howfraught next year is going to be
(01:07):
with debates over tax, debatesover president.
Elect Trump's other campaignpromise policies and how that
actually gets put intolegislation.
Kyle Hulehan (01:16):
Then.
What are some of those datesthat people should be aware of
Erica York (01:21):
One big one that's going to come up right away in
the new year is the suspensionor the expiration of the
suspension of the debt limitceiling.
So this places a cap on how muchessentially the U S government
can borrow.
And if that expires, then nomore new borrowing can take
place.
The treasury department has somespecial measures they can do to
continue making payments asneeded, but ultimately it means
(01:44):
Congress is going to have tolift the debt ceiling again.
And that's coming like firstthing in January when they get
back to town.
Um, of course, then we have theinauguration of president Trump
coming up in January.
And from, from then it's reallyup to Congress, how quickly
things move.
You know, there's been talkabout doing a reconciliation
bill, um, within the firsthundred days, there's also been
(02:05):
talk about two reconciliationbills done next year.
One to address tax, one toaddress other policies, um, the
dates on those, you know,there's going to be.
Urgency associated with that,but with big moving pieces of
legislation, like what we'reexpecting to see in 2025, it'll
be really hard to get that doneearly.
So I would expect we see thatprocess stretch out to the
(02:28):
summer, maybe even to the fall.
Of course, the big deadline thatmatters on tax is at the end of
2025.
So after December 31st nextyear, All of those individual
provisions from the TCJA expire,um, the estate tax provisions
expire and a several businesstax provisions become tighter or
get a little bit worse.
And so ultimately that's thereal deadline for when tax needs
(02:52):
to be wrapped up ideally beforethat a little bit so people can
plan and not have a, you know,surprise about what their tax is
2026.
Kyle Hulehan (03:01):
and you know, maybe we've talked about this
quite a bit We've talked aboutyou know, TCJA expiring.
Could you maybe give people thelike too long didn't read why
this is actually important
Erica York (03:10):
So back in 2017, Congress passed a tax reform
bill.
It made some permanent changes,but because it used the budget
reconciliation process, whichplaces constraints on what you
can do, um, it made temporarytax cuts for individuals.
And so it cut taxes for peopleacross the income spectrum, it
lowered tax rates, increased thechild tax credit, lots of moving
(03:31):
pieces.
And all of those moving piecesrevert back to prior law after
the end of this year, becausethey did those temporarily, if
that expiration is allowed tooccur, we've estimated that more
than 62 percent of taxpayerswould see tax increases.
If you take the individual taxcuts that are expiring, plus the
business tax cuts that areworsening, um, the average tax
(03:53):
increase would be about 2800dollars.
So a pretty big jump in taxesscheduled to occur if Congress
does nothing.
It's not likely that Congress isgoing to let that happen, but
it's also really uncertain whatexactly they're going to do.
So that's why this is one of thevery big legislative issues for
2025.
Kyle Hulehan (04:11):
Yeah, so Erica, I mean we've we've hit this topic
quite a bit over over the Arelike eight or ten episodes that
we've done together.
Uh, you recently testified ontariffs Could you tell people a
little bit about that?
Erica York (04:27):
Yeah.
So I was invited to testifybefore the joint economic
committee.
They're having a hearing ontariffs, how they affect costs,
how they affect prices, how theyaffect manufacturing.
And so my testimony is focusingon what we know from the 2018,
2019 trade war.
Which is that the tariffsimposed under president Trump's
first term shrunk the U Seconomy.
(04:49):
They raise costs, both forbusinesses that buy inputs from
abroad and for consumers thateither buy consumer goods from
abroad or buy products made inthe U S with U S tariffs.
foreign inputs as part of thecomposition of that good.
Um, so those costs went upbecause us import prices went
up.
Uh, we saw a decline inmanufacturing jobs, both from
(05:12):
those higher input costs andfrom retaliation that other
countries put on us exports inresponse to the tariffs we
imposed.
So overall net negative outcomesfor Workers for farmers for
manufacturers for the U.
S.
economy as a whole, and, youknow, we have a lot of tax
policy reforms that could be onthe table that would meet these
(05:35):
goals that tariffs are supposedto do, but don't actually so
whether it's, you know, boostingmanufacturing productivity,
increasing incentives to investin the U.
S.
or locate production in the U.
S.
There's a lot that can be donein a simple and neutral way in
the tax code, like fullexpensing for capital
investment.
Appreciate it.
Full expensing for research anddevelopment, um, that do not
(05:56):
come with all of those downsidesthat tariffs come with and that
actually would result in thesebetter outcomes.
And so my testimony focused onkind of those two points, the
negatives of tariffs.
Um, we know they don't work andhere are some tax policy ideas
that we do know work, um, andcould better achieve these
goals.
Kyle Hulehan (06:12):
I you know, I I feel like sometimes this stuff
can be so elusive or it seems alittle abstract But correct me
if i'm wrong.
I I think it was It was washersor dryers or something that the
price of tariffs actuallyaffected like something people
are buying in their everydaylives.
This isn't like, you know, metalor building or steel, which were
things that were affected, Ibelieve, but, you know, there
(06:33):
are things in people's reallives that they will be
purchasing, purchasing thatcould be affected by tariffs.
Erica York (06:37):
Absolutely.
Yeah.
The first Trump administrationput tariffs on washing machines
and Big surprise, the price ofwashing machines that you buy at
the store went up.
And, um, one study found thateven the price of dryers, which
were not subject to tariffs, butare sold often in a package with
washers, went up too.
So not only did you have to paymore for your washer, Because
(06:59):
you had to pay more for yourwasher that gave companies room
to make.
You also pay more for yourdryer.
And so consumer costs went up,um, across the economy by, by
billions.
Um, now you'll hear tariffproponents say, yeah, but this
resulted in us saving a fewjobs.
But if you look at how muchconsumers had to pay to save a
job, we paid more than theperson.
(07:20):
Working in that saved job wasactually earning, which just
shows how much economic loss isoccurring for us to pay so much
more to save one job, ratherthan for us to look at reforms
that would boost productivity,boost these growth incentives in
a way that grows the economy,rather than that, just
redistributing income fromconsumers to protected sectors.
(07:42):
And, you know, if you look at.
One of the complicating factorshere that makes it hard to
produce washing machines in theUnited States is that we place
tariffs on steel, which are oneof the things that you have to
have access to to make a washingmachine.
So we're increasing the cost ofsteel for the companies, um,
which makes it even harder toproduce, which again adds to the
ultimate price that consumerspay.
(08:02):
So tariffs are a really, um,really bad tool for, for the
goals that proponents want toachieve with them.
Kyle Hulehan (08:09):
Yeah.
So we just, we just couldn'tfinish the year without talking
about tariffs.
A little bit more, uh, Erica,it's been really great doing our
podcast this year.
We will continue into 2025.
We're going to cover everythingthat's going on in taxes.
It's going to be a very, verybig year.
Thank you for being on the showtoday with us.
Erica York (08:27):
Yeah.
Thanks, Kyle.
And happy holidays and happy newyear to everybody.
Kyle Hulehan (08:30):
Yes.
Happy holidays, everyone.
And before we sign off, asalways, if you have any burning
questions on taxes, you can sendthem our way via email to
podcast at tax foundation.
org, or you can slide into ourDMS at deduction pod on Twitter.
Thanks for listening.
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