For Trump and Republicans in Congress, ‘everything is in play’ on tax cuts

President-elect Donald Trump is poised to push swiftly for new tax cuts if Republicans win full control of Congress, further slashing corporate rates and extending trillions of dollars of other cuts even as the national debt soars.

Major portions of Trump’s 2017 tax law are set to expire next year, and Republicans are aiming to give Trump a major legislative accomplishment within his first 100 days in office.

The GOP won control of the Senate in Tuesday’s elections. While control of the House is still uncertain, Republicans are optimistic that results are trending toward maintaining their narrow majority.

As party leaders discuss their plans for the early days of a new Trump administration, the attitude that’s emerged on taxes is, “Just go,” according to a top conservative lobbyist familiar with the discussions, speaking on the condition of anonymity to describe private talks. “Rip the Band-Aid and run and just plow it through.”

“They’re going to do this one very early,” Grover Norquist, an antitax advocate and informal Trump economic adviser, told The Washington Post. “The House and Senate guys have been working on this together forever.”

Trump ran on a promise of extending individual tax cuts - which reduced what taxpayers in every income bracket paid - and a bevy of other expensive new changes. He pledged to exempt tipped wages and overtime pay from taxes, along with Social Security benefits, which could rapidly accelerate the insolvency date for social safety-net programs. His 2017 law cut the corporate tax rate from 35 to 21 percent, but Trump on the campaign trail said he hoped to lower it to 15 percent.

The earlier Trump tax cuts overwhelmingly benefited the nation’s highest earners, according to the Urban-Brookings Tax Policy Center.

“There’s just going to have to be a lot of dials adjusted. I have to thread the needle to pass a bill,” Rep. Jason T. Smith (R-Missouri), who appears poised to hold on to the chair of the tax-writing House Ways and Means Committee, said just before lawmakers left Washington in September. “I just want to make sure it’s the optimum tax rate and what that is. But we also have to make sure we’re fiscally smart.”

Congressional Republicans could move to approve those policies through a process called reconciliation, which would allow a bill to pass the Senate with a simple 51-vote majority, dodging a potential filibuster. House Speaker Mike Johnson (R-Louisiana) and other GOP leaders have been meeting for months to plot their moves at the start of a second Trump administration.

“Everything is in play,” Sen. Mike Crapo (R-Idaho), the incoming Senate Finance chair, said over the summer.

That includes a number of policies that Republicans excluded from their 2017 tax package or capped to limit the legislation’s cost.

There is already bipartisan support in Congress for allowing businesses to deduct certain expenses, such as research and development, from their tax bills, after some of those deductions were eliminated or capped in 2017.

“Credits like research and development are great. They are made better by a lower corporate rate,” retired representative Kevin Brady (R-Texas), who chaired the Ways and Means Committee from 2015 to 2019, said in an interview.

Trump could also significantly reduce taxes on capital gains without congressional approval. Toward the end of his first administration, senior White House officials and Treasury staff held extensive discussions about bypassing Congress with a unilateral $100 billion tax cut that would primarily benefit the wealthy.

The plan would have significantly changed how capital gains taxes are calculated. Under current law, an investor who bought a stock for $1,000 in 1980 and sold it for $10,000 today would owe long-term capital gains taxes on the increase in value of $9,000. But under the plan studied by Trump aides, the investor’s cost basis on the asset would be adjusted up to account for inflation - reducing the amount of gain that’s taxable after selling the stock.

“Advisers to him have been talking about it, people around him have been advocating for it,” Norquist said. “There’s a whole industry of people saying, ‘This is constitutional and you should do it.’”

Ultimately, Trump abandoned the effort amid resistance from Treasury Secretary Steven T. Mnuchin. But numerous Trump advisers have hoped to take another shot at it in his second term, arguing that it is more justifiable now after high inflation during the Biden administration, according to two Trump advisers, speaking on the condition of anonymity to discuss private talks.

Trump’s existing plans come with a hefty price tag: The nonpartisan Committee for a Responsible Federal Budget projects that the tax legislation could add $9.15 trillion over the next decade to the national debt, which already sits near $36 trillion.

Trump has also called for eliminating the cap on the state and local tax deduction, or SALT, which Republicans used to offset some of the cost of the 2017 tax law. Unless Congress acts, that cap - $10,000 for both single and married filers - will expire in 2025. That could add an additional $1.2 trillion to the cost of a Trump tax bill, according to CRFB.

Republican leaders have floated proposals to not offset tax cuts with corresponding spending restrictions.

Crapo, once one of the Senate’s leading deficit hawks, said in the spring: “I do not believe that pro-growth tax policy needs to be offset in a very rigid way.”

And while multiple independent studies have shown that the 2017 law did spur economic growth, and that an extension could do the same, it would not come close to paying for most of the tax cuts. Republican majorities in both chambers of Congress passed that law largely without corresponding spending cuts or revenue generators.

“That’s dangerously reckless. It was the wrong thing to do at the time. It would be far more dangerous now given how much our fiscal situation has deteriorated,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “And there’s lots of ways to offset tax cuts. If Republicans want larger tax cuts, cutting spending is an excellent approach to offsetting tax cuts. From their perspective, I would think that would be a twofer.”

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Republicans could use other financial gimmicks - some more accepted than others, budget experts say - to control the cost of a tax bill. They could attempt to use revenue from the tariffs Trump has promised to offset the cost of their tax policy, though that revenue would be likely to fall far short of the full cost of the legislation, according to CRFB.

Some GOP lawmakers have said Congress should reset the spending baseline before considering tax legislation - in other words, instead of factoring in new costs associated with extending the 2017 law, it would nearly zero out the cost by considering it already current policy.

More likely, though, is a move to claw back Biden-era climate agenda spending, according to leading GOP officials. That could save roughly $500 billion, according to estimates from the Congressional Budget Office, and satisfy Republican objectives to unwind much of President Joe Biden’s legacy.

“I think the concerns of debt and deficit are much greater in 2025 than they were in 2017, but we spent a lot of time working on those pay-fors,” Brady said. “Conservatives understand well that our deficit situation, to dig our way out of it, requires economic growth and spending restraint.”

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Julie Zauzmer Weil and Jeff Stein contributed to this report.