The new budget and proposed tax policies could significantly impact taxpayers and businesses through a mix of extended tax cuts, increased compliance requirements, and potential economic shifts. Here’s a breakdown of key changes and their implications:
### Individual Taxpayer Impacts
– : If TCJA provisions expire after 2025, individual rates would revert to pre-2017 levels (e.g., top rate rising from 37% to 39.6%). Republicans aim to extend these cuts, which would maintain lower rates for all brackets.
– : For 2025, standard deductions rise to $15,000 (single filers) and $30,000 (joint filers). If TCJA expires, deductions would shrink, pushing more taxpayers to itemize.
– : Trump proposes repealing the $10,000 cap on state and local tax deductions, benefiting higher-income taxpayers in high-tax states.
– Elimination of income taxes on Social Security benefits, tips, and overtime pay could save retirees and service workers thousands annually. For example, removing taxes on tips alone would cost $78 billion over a decade.
– The estate tax exemption rises to $13.99 million in 2025 (up from $13.61 million in 2024), shielding wealthier households from larger tax liabilities.
### Business Impacts
– Proposed cuts to corporate rates (21% → 20% for most companies, 15% for U.S. manufacturers) aim to incentivize domestic production. However, these cuts could add $960 billion to deficits over a decade.
– : Reinstating 100% immediate expensing for qualified assets (phased out post-2023) would encourage capital investments but reduce federal revenue.
– : Most small businesses must report ownership details to FinCEN by March 21, 2025. Non-compliance risks penalties up to $10,000 and criminal charges, though enforcement is paused pending new rules.
– : Public companies, nonprofits, and large firms (20+ employees, $5M+ revenue) are exempt, but millions of small businesses face added compliance costs.
### Economic and Fiscal Trade-offs
– : Extending TCJA and adding new tax cuts could increase deficits by $4.5 trillion through 2034. Republicans propose offsetting this with $2 trillion in spending cuts, but details remain unclear.
– : Proponents argue tax cuts could boost long-run GDP by 1.1%, though critics note benefits disproportionately favor high earners and foreign investors.
### Legislative Challenges
– : The House budget allows $4.5 trillion in tax cuts tied to spending reductions, while the Senate’s resolution blocks tax cuts entirely, setting up a clash.
– : Trump’s plan to replace income taxes with higher tariffs risks trade disruptions and consumer price hikes.
### Key Takeaways
– : Middle-income households benefit from higher standard deductions and TCJA extensions, while wealthier individuals gain from estate tax breaks and SALT cap repeal.
– : Small businesses face BOI reporting burdens, but corporations may see lower rates and depreciation incentives.
– : Legal challenges to BOI rules and legislative gridlock over TCJA’s future create compliance and financial planning complexities.
The budget’s success hinges on reconciling competing priorities: sustaining tax relief without exacerbating deficits or sparking inflation. Businesses and taxpayers should prepare for both extended cuts and potential reversals post-2025.
