The 2024 election results certainly imply a change of direction in government and the IRS. But how far will they go?
First, let's review the status quo: The IRS collects about $5 trillion in taxes to pay for the running of the government. There are currently 80,000 IRS employees. Last year, that $5 trillion didn't even cover the government's expenses which are well over $6 trillion, creating a current deficit over $1 trillion.
Will Tariffs Replace Taxes? Trump 2.0 certainly implies that tariffs will happen to punish competitor country's trading practices. As tariffs clearly do not generate revenue at the rate that taxes do, they simply won't be able to replace income taxes. However, one can expect Congress/Trump 2.0 to offset some taxes with tariffs at least as a PR tool to defend their "America first" brand.
Will IRS enforcement continue at current levels? While the IRS has a pretty good R.O.I. for generating revenues and reducing deficits, this likely won't convince the GOP to change their anti-IRS brand. We can expect enforcement to stay the same or possibly decrease a bit. ($20 billion of 60 billion in planned IRS monies have been trimmed from the Inflation Reduction Act and probably another $20 tril will be removed but that still leaves a $20 billion bump to IRS coffers).
Making the 2016 Tax Cuts permanent. The Qualified business income deduction and other tax changes were definitely the biggest policy wins of Trump 1.0. We can expect that these changes will not sunset, but be made permanent in Trump 2.0.
Here's our recent podcast on the 2024 election: https://watax.com/podcast/elec...
Here was our 2016 Election blog post: https://watax.com/blog/2016-el...
