4 Tax Issues to Watch in the 2024 U.S. Presidential Election

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This month I sat down with Todd Simmens, Tax Policy and Legislation Technical Practice Leader at BDO, ahead of the U.S. presidential election next week. Todd shared his perspective on some of the top tax issues to watch this election year and offered insights on how companies can prepare for potential changes. Below I share four of the key takeaways from my conversation with Todd.

The Tax Outlook This Election Year

As the U.S. presidential election approaches, both candidates have shared aspects of their potential tax plans. Vice President Kamala Harris (D) has provided substantial details on her tax policy vision, which shares some similarities with President Joe Biden's fiscal 2025 budget. Former President Donald Trump (R) has not released a comprehensive plan but has commented on various tax issues, offering insights into his approach.

Passing tax legislation in the upcoming presidential term will likely prove challenging, regardless of which party controls the White House and Congress. Even with unified party control, tax law changes may require use of the budget reconciliation process because the party controlling the Senate will likely lack sufficient votes to overcome a filibuster. Split-party control across the White House, Senate, and House would further diminish the likelihood of enacting tax legislation. Even so, because tax policy significantly affects business decisions, tax leaders should carefully consider how proposed policies might affect their overall tax positions.

#1: Changes to Corporate Tax Rates

Both candidates have proposed changes to corporate tax rates and international tax policy, although implementing any of the proposals will depend on Congress, which lowered the corporate rate from 35% to 21% in the 2017 Tax Cuts and Jobs Act (TCJA). Trump advocates lowering the corporate rate to 15% for U.S.-based production, and Harris suggests raising the rate to 28%.

Without changes, the tax rate for domestic corporations with international operations stands to increase: the rate for global intangible low-taxed income (GILTI) will jump from 10.5% to 13.125%, the base erosion and anti-abuse tax (BEAT) rate will move from 10% to 12.5%, and the rate for qualifying foreign-derived intangible income (FDII) will rise from 13.125% to about 16.3%.

For international businesses, Trump proposes a 20% rate for offshore production, while Harris has said she would align with Organization for Economic Co-operation and Development (OECD) Pillar Two rules.

To learn more about proposed changes to corporate taxes, read our insight about how the election results could shape corporate tax policy.?

#2: Extension — or No Extension — of TCJA Provisions

The TCJA contains several key corporate tax provisions set to expire in 2025. Congress attempted to extend some provisions via H.R. 7024, the Tax Relief for American Families and Workers Act, which passed the House but stalled in the Senate despite receiving bipartisan support.

Trump has said he would extend expiring TCJA provisions, and a GOP-controlled White House and Congress would likely push to extend and possibly expand some aspects. Harris has not detailed her approach to many of the expiring provisions directly affecting corporations, focusing instead on individual taxes, such as increasing rates for high earners and expanding tax credits. It is likely that under Democratic control of the White House and Congress, many TCJA provisions will sunset. A divided government will complicate the process of achieving consensus for long-term plans, potentially leading to short-term agreements with two- or three-year lifespans to address some TCJA provisions.

#3: Changes to Federal Income Tax Credits and Deductions

The 2024 BDO Tax Strategist Survey revealed that the top tax policy concern for businesses in the upcoming election is potential changes to or claw backs of renewable energy subsidies introduced by the Inflation Reduction Act (IRA). However, major alterations seem unlikely, given the bipartisan support for expanding U.S. manufacturing and the widespread popularity of those programs.

Other tax deduction changes also loom. Harris proposes increasing the small business startup deduction from $5,000 to $50,000. Trump suggests eliminating the $10,000 cap on state and local tax deductions implemented as part of the TJCA, allowing taxpayers to deduct more of their state and local taxes on federal returns.

#4: Changes to Trade Policy

Because of their impact on domestic industry and the economy, customs and trade policy are prominent in both candidates’ agendas.

The Biden administration recently increased Internal Revenue Code Section 301 trade remedy tariffs on Chinese imports, including electric vehicles, batteries, and renewable energy components, expanding on Trump-era policies to bolster domestic manufacturing. Those tariffs, while challenging for industries relying on imports, are likely to persist regardless of which party controls the presidency or Congress.

Trump has also proposed steep increases in regular (that is, normal trade relations) tariffs: He would implement tariffs of 60% on all imported goods originating in China and 20% on everything else the U.S. imports from all other countries.? He’s also said he would impose tariffs of 100% on all goods from Mexico. However, unlike the Section 301 tariffs, which are imposed via Executive Order, regular tariffs can be increased only via congressional action. Most analysts believe such legislation stands little to no chance of becoming law.

Both parties are expected to support domestic manufacturing through a combination of incentives, such as the IRA’s tax credits and trade remedy measures, including continued application of the Section 232 national security tariffs and new Section 201 safeguard tariff actions to prevent import surges on targeted merchandise. Both candidates have been vocal about the steps they’ll take to support domestic manufacturing, and we can expect to see tax policy leveraged to help the candidate achieve their goals.

What’s Next?

As the election approaches, most companies will be in a holding pattern, with uncertainty potentially delaying major strategic and financial decisions. Organizations should consider each nominee's stated policy goals and their effects on strategic planning but await further clarity before taking concrete actions. In the interim, businesses can take advantage of current opportunities, such as fully leveraging interest expense deductions and purchasing tax credits. Those strategies could provide near-term financial benefits while preparing for potential policy shifts.

To stay up to date with BDO insights and analysis on tax policy shifts, visit our website.