For several years, tax practitioners knew that tax planning in the year 2025 would be exceptionally challenging for individual taxpayers and unincorporated businesses.  In 2017, the Tax Cuts & Jobs Act permanently slashed corporate taxes, while enacting only temporary tax cuts for non-corporate taxpayers. Those temporary tax cuts generally expire on Dec. 31, 2025.  Until the election, we were not sure who would win the election. Since both parties had radically different views of how to move forward with tax legislation, election uncertainty translated into tax law perplexity.  Although we now know that the Republicans will control the White House and 199th Congress for the next two years, there is less uncertainty; but the future of tax law is still ambiguous.  The GOP will not have 60 votes in the Senate and will likely only have a narrow majority in the House.  Therefore, just as in 2017, any tax law changes can only avoid filibuster if they are passed using the budget reconciliation process, which only requires a simple majority in each house of Congress to pass. Since the GOP House margin of control is so thin, rogue House members can exert unprecedented power to derail proposed legislation.  Republicans campaigned on making the TCJA’s non-corporate tax cuts permanent. According to Congressional Budget Office estimates made last May, permanently extending those provisions will add $4.6 trillion to the national debt over 10 years.  However, under the so-called “Byrd rule” adopted by the Senate, there are limitations to deficits created by budget reconciliation bills. In 2017, that limitation was $1.5 trillion over 10 years.  In 2017 Republicans contended that the 2017 tax cuts would generate sufficient economic growth to make them revenue-neutral over the long term. However, in recent testimony before a Senate Budget Committee, CBO Director Phillip Swagel stated that, although the TCJA had a positive impact on the economy, “By far it did not pay for itself and the same would apply to an extension of the 2017 Act.”  In addition to the TCJA tax cuts, numerous additional tax benefits will expire before 2026. Extending these cuts and fulfilling other tax-related campaign promises will further add to the deficit.  Approximately $700 billion of TCJA cuts were funded by limiting the deduction for state and local income taxes (“SALT”). Many Republicans, including our Rep. Mike Garcia, campaigned to repeal the SALT deduction limitation.  Doing so will be expensive. In 2017 the CBO estimated that the SALT limitation increased tax collections by almost $100 billion annually. Based on that estimate, not continuing the cap on SALT deductions would add $1 trillion to the cost of extending the TCJA non-corporate tax cuts.  The costs of extending the tax cuts can be funded three ways, none of which are particularly appealing.  The tax cuts could be funded by issuing additional debt, which will increase the government’s interest costs.  The revenue loss from the tax cuts can be offset by spending cuts. Elon Musk estimates he could reduce spending by about $2 trillion. However, that may prove to be easier said than done and will likelt result in massive disruptions to government services that may prove recessionary.  The income tax cuts could be offset by some combination of tariffs or a consumption tax such as a value added tax. However, both would significantly increase the cost of consumption and would offset the benefits of reduced income taxes — particularly for lower- and middle-income households.  Unlike 2017, future tax cuts will not be as helpful to the economy because they must be paid for contemporaneously. Congress has figured out how to game the Byrd rule which looks at the 10-year period in totality. The economic assumptions supporting the TCJA and subsequent legislation frontload the tax cuts and defer offsetting revenue increases, thereby creating an illusion of lower overall costs.  The resulting short-term deficits require the government to finance a large portion of those cuts. The deferred tax revenue is never used to repay the debt. Today, the national debt has increased to levels where this is no longer feasible.  In 2017, it took Congress nearly a year to pass the TCJA. If 2025 tax legislation progresses in a similar timeframe, we may not know its effect on taxpayers until late 2025.  All of this means that tax planning for individuals and non-corporate businesses is as clear as muddy water. Clearly it will be difficult for Congress to extend all of the expiring TCJA’s non-corporate tax cuts.  So, for now, trying to ascertain the future tax position of a particular non-corporate taxpayer is still a wild guess.  Jim de Bree, a Valencia resident, is a semi-retired CPA. The post Jim de Bree | Taxes After the Election appeared first on Santa Clarita Valley Signal.