The Republican Party's landslide victory in the presidential election and Congress transformed what could have been merely a continuation of Trump's tax reduction policies into a multi-faceted movement to cut taxes in a new and greater way.

Finance and Economics APP learned that the Republican Party is about to occupy the majority of seats in both the Senate and the House, which means Trump can enact tax legislation without making concessions to the Democratic Party. Republicans will only be limited by how much deficit spending their party members and the global financial markets can tolerate.

Rohit Kumar, former tax policy advisor to Mitch McConnell, joint head of the national tax office at PricewaterhouseCoopers, said: "This is a trillion dollar issue."

Gordon Gray, former assistant to the Senate Budget Committee of the Republican Party and current executive director of the Pinpoint Policy Institute, stated that as Congress is now more likely to extend expiring provisions of the 2017 law, including a 20% reduction in corporate income and an increase in the estate tax exemption, owners of closely held companies and high-net-worth families will benefit.

Many Democrats have proposed taxing the rich during their campaigns and have advocated paying for other tax cuts by targeting these provisions, as well as repealing tax cuts for companies and individuals with incomes over $400,000.

Grover Norquist, chairman of the conservative organization Americans for Tax Reform, a significant figure in the tax policy debate within the Republican Party, stated that the Republican Party's success in the election not only supported the 2017 tax cut plan, but also paved the way for further cuts in corporate tax rates and exemptions from federal income tax.

During his presidential campaign, Trump vigorously promoted the reduction of corporate tax rates and deductions for small businesses, and made countless other promises of tax cuts.

The first thing Republicans need to negotiate is the size of the tax cut plan and how much they are willing to increase the federal deficit. By the end of the fiscal year on September 30, the federal deficit had reached 1.83 trillion US dollars. According to the non-partisan financial watchdog organization 'Committee for a Responsible Federal Budget,' just extending expiring tax policies would increase the deficit by 4.6 trillion US dollars over the next 10 years, while all of Trump's campaign plans would increase the deficit by as much as 7.75 trillion US dollars.

Stephen Moore, a senior researcher at the Traditional Foundation and an informal advisor to Trump, said that tax cuts will stimulate economic growth, and Republicans could also cancel spending approved by Biden to help offset the cost of the tax cuts. However, he added that the bill might increase the deficit to some extent.

Sage Eastman, a Republican strategist and former assistant to the House Ways and Means Committee, said that this has sparked a conflict within the Republican party between deficit hawks and lawmakers who believe that the revenue losses from tax cuts do not need to be offset. The House Ways and Means Committee has jurisdiction over tax legislation.

Mike Crapo, the Republican Senator from Idaho who is set to become the chairman of the Senate Finance Committee, said that the 'pro-growth' tax policies do not need to be paid for. Kyle Pomerleau, a senior researcher at the American Enterprise Institute, said that the tax cuts in 2017 did have some positive economic effects, but they were much more moderate than the predictions of the Trump administration and some Republicans.

Martha Gimbel, Executive Director of the Yale Budget Lab and former White House economist in the Biden administration, said, 'It's important to see if the markets are starting to panic, if they are considering sufficient deficit spending, or if they will decide to look into it carefully.'

Trump vowed to impose tariffs of 10% to 20% on all imported goods, 60% on Chinese products, and use them to offset tax cuts. However, lawmakers will have to decide whether to include these tariffs in the tax bill in order to officially calculate revenue - a difficult vote for Republicans, especially those who support free trade. They may also just assume that the tariffs imposed by the President will continue to generate revenue, even though Trump may reach a trade agreement to remove tariffs in the future.

Dave Camp, Senior Policy Advisor at PwC and former chairman of the House Ways and Means Committee, said, 'There is always a way to make things go smoothly.'

The Peterson Institute for International Economics estimates that these tariffs will only generate about 225 billion US dollars in revenue annually. Kimberly Clausing, a tax law professor at the University of California, Los Angeles, who served as a Treasury Department official in the Biden administration, said that Republicans may overestimate the revenue from tariffs and overlook the negative economic impact of tariffs.

Kumar pointed out that Republicans expressed their desire to pass a tax bill within the first 100 days of Trump's second term, although negotiations on the details may take longer.

Democratic strategist and senior legislative policy combatant Scott Mulhauser said that the slim Republican majority in the House allows a small number of Republican lawmakers to demand specific tax breaks, and the Democratic strategy will focus on vulnerable Republican lawmakers in swing districts, pushing them to support or oppose individual provisions.

Skeptics say they doubt all the tax cuts Trump proposed during his campaign - as the cost and difficulty of drafting the entire list have increased, even some of his advisors are unclear on which proposals he is most committed to.

Trump promised to restore the full value of the State and Local Tax Deduction (SALT), a popular deduction for high-tax states including New York, New Jersey, and California. The tax law signed by Trump stipulates that regardless of marital status, the deduction amount cannot exceed 0.01 million dollars.

While some adjustments to SALT are possible, such as raising the limit or doubling the deduction amount for married couples filing jointly, completely eliminating this restriction is not feasible as it would result in tax revenue losses: according to the bipartisan Committee for a Responsible Federal Budget, this would lead to a loss of 1.2 trillion dollars over 10 years.

Editor/Lambor