Business and Finance
Republican lawmakers will reshape tax policy in 2025 — a tax expert explains what to expect
Jim Franklin, Western Governors University School of Business
Although coverage of the 2024 election was dominated by the economy, taxes didn’t get much attention in the run-up to the vote. That’s a bit of a surprise, since 2025 will be a major year for America’s tax system – in fact, the fate of the most significant tax reform in three decades hangs in the balance.
That would be the Tax Cuts and Jobs Act, which Congress passed during President-elect Donald Trump’s first term in office in 2017. If lawmakers don’t take action, the whole package is set to expire at the end of next year. Western Governors University School of Business tax expert Jim Franklin explains what might be in store for the act, and for taxpayers.
What do the election results mean for Republicans’ ability to advance their tax agenda?
We know there will be a Republican president, and it appears the Republican Party will have the majority in both chambers of Congress. That means Republicans will be able to pass a tax bill along party lines, similar to how Democrats passed the Inflation Reduction Act using budget reconciliation.
This would allow Republicans to pass key policies with a simple majority. The Republican majority is narrow, so it will be interesting to see how the leaders unify their constituent groups.
Republicans have traditionally supported lower tax rates for businesses and individuals, as well as tax incentives to help boost economic activity.
What’s next for the Tax Cuts and Jobs Act?
Currently, the act is set to expire at the end of 2025, but Trump and Republicans favor renewing many of its provisions.
The nonpartisan Congressional Budget Office in May 2024 estimated that extending the act would cost the government US$4.6 trillion, and there’s a split within the party, with one bloc of congressional Republicans calling for a full extension and another asking for the balancing of tax policy and annual federal deficits.
Republicans are likely to fight to keep key components in place, including the higher standard deduction, reduced corporate tax rates, individual rate cuts and an increased estate tax exemption.
There’s even talk of lowering the corporate tax rate further, possibly to 15% for domestic production, which would be a significant move.
What other tax measures are Republicans considering?
Trump mentioned a variety of tax relief ideas on the campaign trail, including exempting tips, Social Security benefits and overtime pay from income taxes, and creating an itemized deduction for auto loan interest.
However, Republicans aren’t entirely unified on tax policy. Some deficit hawks are concerned about revenue losses, so there could be internal pushback on all these points. The real question is whether there will be enough opposition within the party to alter or block certain proposals.
But I expect many parts of the act to be renewed, and we may see some additions. For example, there’s been a lot of pressure around increasing the state and local tax deduction cap, also known as SALT, which has bipartisan support in states with higher state income taxes like New York, California and Illinois. It will be interesting to see if that gains any traction. There’s a lot of pressure among representatives, both Republicans and Democrats, to gain some relief in that area.
Where will they find revenue?
Good question. Observers are indicating that Republicans are likely to look at cutting green energy subsidies from the 2022 Inflation Reduction Act. These could be eliminated to help balance out the cost of their new tax proposals.
Another area to watch is tariffs. There’s talk of raising tariffs on Chinese goods — potentially up to 60% — and even imposing a universal tariff on all U.S. imports at a 20% rate. It will be interesting to see how this plays out. Will it be more targeted? For example, will there be continued tariffs on select imports such as automotive imports from China to protect the U.S. electric vehicle market?
What will you be watching between now and Tax Day?
One factor will be Trump’s cabinet appointments. Whoever he nominates for Treasury secretary, for instance, could have a big influence. They can help shape what the tax bill looks like. Another key factor will be who ends up on the congressional tax committees. The composition of key committees will affect the direction of policy and the specific details.
What do you think will happen with tariffs?
Tariffs are unpredictable: They could be applied broadly, or more selectively. It could be similar to the way that Trump and his first administration placed some tariffs on steel, aluminum and solar panels. Interestingly, many of the tariffs were retained by the Biden administration.
Blanket tariffs could slow down the economy, so there is always a risk. Tariffs impact inflation because they affect the cost of imported goods, which would likely reduce consumers’ purchasing power. Domestic political pressure will play a role, as higher tariffs could raise prices on many goods that are imported, including essential products like medications.
Do you have advice for people struggling to keep up with the latest tax news?
Observers often take every policy suggestion on the campaign trail literally — exempting tips, Social Security benefits, overtime pay, etc. — as if all these proposals will pass exactly as stated. But the details matter, and policies are rarely implemented without adjustments. So it’s wise to read beyond the headlines.
Jim Franklin, Director of Academic Programs, Western Governors University School of Business
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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(Family Features) Saving money is a critical financial practice that nearly everyone strives to accomplish. Yet, it is often easier in theory than reality. If you are anxious or concerned about your financial situation and your ability to save, know you’re not alone.
More than one-third (36%) of the general U.S. population feels anxious about their current financial situation. Further, many households across the country do not feel in control of their finances, with 11% reporting they’ve “forfeited contributions to their retirement accounts,” potentially impacting themselves later in life. These figures from the World Financial Group paint a concerning picture of how people across the country feel about their current and future finances.
Consider these savings tips.
Create a Budget
Every budget begins with your net income. Ensure you subtract deductions like taxes, workplace benefits, insurance or retirement plan contributions. This way, you know exactly how much money is available each month. Next, calculate all fixed expenses, including regular monthly payments or bills. These include utilities, cellphone bills, rent or mortgage, vehicle payments and anything that remains static month-to-month. Subtract those fixed expenses from your net income to create your monthly budget.
Track Your Expenses
Once your budget is in place, it’s much easier to keep track of expenses that vary month-to-month, like gas, groceries and entertainment costs such as dining out, seeing a movie or going to a sporting event. Tracking minor expenses may seem tedious initially, but logging each purchase can help set a foundation for financial accountability.
Set Savings Goals
Tracking your expenses for a few months should give you a good idea of how realistic it is to save a set amount of money each month. Before you set a goal, or if you’re struggling to consistently reach savings goals, take a financial literacy quiz to test your knowledge and then consider meeting with a financial services expert.
Pay Down Debts
Debt is one of the largest barricades people face when trying to save more money. If you feel debts are stopping you from reaching your financial goals, know it is possible to pay off debt while saving at the same time. Make sure to prioritize debts with higher interest rates that lead to compounding costs in the future and then, if possible, make more than the minimum payment to pay them off faster. It may limit you in the short-term but can equate to more financial freedom – and the ability to save more – in the future.
Find more expert savings advice and test your financial literacy by visiting WorldFinancialGroup.com.
Photo courtesy of iStock
SOURCE:
World Financial Group
Our Lifestyle section on STM Daily News is a hub of inspiration and practical information, offering a range of articles that touch on various aspects of daily life. From tips on family finances to guides for maintaining health and wellness, we strive to empower our readers with knowledge and resources to enhance their lifestyles. Whether you’re seeking outdoor activity ideas, fashion trends, or travel recommendations, our lifestyle section has got you covered. Visit us today at https://stmdailynews.com/category/lifestyle/ and embark on a journey of discovery and self-improvement.
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Community
The Hidden Harm of Civil Legal Issues: A path to help Americans in need
Many Americans face unresolved civil legal issues, often unaware of available assistance, leading to disadvantages in legal systems despite the existence of free help from legal aid organizations.
Civil Legal Issues
(Family Features) Your landlord is threatening to evict you, while maintenance issues in your apartment complex have been ignored, making it difficult to get to work and pay the bills. That’s a civil legal issue.
You know you’re qualified for Veterans or Social Security benefits, but you can’t seem to get through the red tape. That’s a civil legal issue.
The mobile home park where you lease a space for your manufactured home is kicking you out, and you may lose your investment in the home as well as a place to live. That’s a civil legal issue.
A survey from the Legal Services Corporation (LSC) found many Americans who experienced a civil legal matter within the past three years (59%) didn’t seek legal help from an attorney who could have been pivotal in getting their issues resolved.
A misunderstanding found in the survey is that more than half of American adults (56%) wrongly believe they have a right to a lawyer in a civil case. In fact, Americans only have a right to a lawyer when they have been accused of a crime. This misperception means some people may end up in civil court at a big disadvantage in a complex legal system because they don’t have legal representation.
Civil legal issues can be life-changing. Even though people do not have a right to a lawyer in these cases, free help is available for many low-income people who cannot afford to hire a lawyer. Celebrating its 50th anniversary this year, LSC supports 130 independent, nonprofit legal aid programs in every state, the District of Columbia and the territories. It launched the Protecting the Promise outreach campaign, aimed at ensuring legal aid is available to low-income Americans who need it.
Legal aid attorneys help with the most common civil legal issues people in the national survey said they faced in the last three years, even if they didn’t recognize them as legal issues. Those were debt collection (63%), job loss (56%) and issues surrounding natural disasters (52%).
In addition to these issues, legal aid organizations supported by LSC also help with family law issues like divorce, child custody and domestic violence.
Many Americans don’t realize when they could benefit from legal assistance. A significant portion of Americans (1 in 3) who didn’t seek legal help for civil matters in the past three years said they thought they could deal with the problem on their own or didn’t think the problem was serious enough for legal help. Additionally, almost one-quarter didn’t reach out for legal assistance because they didn’t think an attorney could help with their problems.
More than three-quarters of women didn’t seek legal help when contacted by creditors or collection agencies compared to fewer than half of men who didn’t seek help.
Money is a big barrier. Among those who did not seek legal assistance, nearly one-third did not do so because they were worried about the cost.
Unresolved civil legal issues can pile up, hurting individuals, families and even entire communities. For people with low incomes, getting help can be difficult. Hiring a lawyer can be expensive, and most people don’t know where to start.
To see if you’re eligible for civil legal aid or to find a legal aid organization in your area, visit lsc.gov.
Photos courtesy of Shutterstock
SOURCE:
Legal Services Corporation
The Bridge is a section of the STM Daily News Blog meant for diversity, offering real news stories about bona fide community efforts to perpetuate a greater good. The purpose of The Bridge is to connect the divides that separate us, fostering understanding and empathy among different groups. By highlighting positive initiatives and inspirational actions, The Bridge aims to create a sense of unity and shared purpose. This section brings to light stories of individuals and organizations working tirelessly to promote inclusivity, equality, and mutual respect. Through these narratives, readers are encouraged to appreciate the richness of diverse perspectives and to participate actively in building stronger, more cohesive communities.
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(Family Features) Being financially secure in retirement starts while you’re still working. Because you likely don’t want to remain in the workforce forever, creating a plan can help ensure you’re confident in living comfortably in retirement when the time comes.
Retirement plans and financial aspirations are deeply personal and often tied to family life, ambitions and values, meaning it’s entirely up to you when to start planning and saving for your post-work years. However, the worrying reality is that many households across the U.S. don’t feel in control of their finances. According to a study from World Financial Group, 11% of households have “forfeited contributions to their retirement accounts,” a decision that will have an impact later in life.
To ensure you’re prepared, consider these steps to plan for retirement.
Understand When You Can Retire and How Much Money You Will Need
Because nearly everyone has different goals for retirement, there’s no one-size-fits-all approach to when and how much money you’ll need to stop working. Assess your unique situation – including all your forms of income, assets and savings – and calculate what you’ll need to maintain your standard of living and cover expenses, including any discretionary spending, in retirement.
Choose an Appropriate Retirement Plan for Your Needs
In addition to figuring out how much you should save, having the right savings vehicle is an important consideration. A good place to start is an employer-sponsored retirement plan with fund-matching, such as a 401(k). If a workplace retirement plan is not available, consider setting aside money for retirement through an IRA that provides access to a range of investments, including stocks, bonds and mutual funds. Some insurance products may also provide benefits during retirement, such as life insurance coverage, supplemental income and tax advantages.
Take Stock of Your Current Assets
Your current assets include more than just what’s in your bank account. Beyond your paycheck, factor in real estate, investment accounts and any insurance policies you may have. If you need help understanding your finances, take a financial literacy quiz to test your knowledge and then consider meeting with a financial services expert.
Create a Retirement Budget and Look at Ways to Reduce Expenses
Your retirement budget should look similar to yours while still part of the workforce. Start by accounting for how much money is coming in and how much is going out toward fixed expenses like utilities, cellphone bills, insurance premiums, rent or mortgage and vehicle payments then track other expenses like groceries, gasoline and other spending toward non-essentials like entertainment and clothing. From there, look for ways to cut expenses to stretch your funds further, such as canceling a streaming service, dining out less or skipping a new movie release.
Account for Unexpected Expenses
Before retirement, consider how you’d handle unexpected expenses such as a medical emergency, home or vehicle repair or moving into an assisted living facility. Suppose you don’t have the appropriate health and homeowner’s insurance coverage. In that case, you may be covering those costs out-of-pocket, which could limit or hinder your financial flexibility on a fixed income.
Test your literacy and find additional resources to plan for retirement at WorldFinancialGroup.com.
Photo courtesy of iStock
SOURCE:
World Financial Group
Our Lifestyle section on STM Daily News is a hub of inspiration and practical information, offering a range of articles that touch on various aspects of daily life. From tips on family finances to guides for maintaining health and wellness, we strive to empower our readers with knowledge and resources to enhance their lifestyles. Whether you’re seeking outdoor activity ideas, fashion trends, or travel recommendations, our lifestyle section has got you covered. Visit us today at https://stmdailynews.com/category/lifestyle/ and embark on a journey of discovery and self-improvement.
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