Post-Election Policy Scenarios Through A Tax Lens

Whatever the outcome of the November 2024 US presidential and congressional elections, the next administration’s policy agenda—from infrastructure investments and business incentives to tax and regulatory priorities—will help shape the business environment for years to come. As companies and their boards consider the policy implications of different election outcomes, tax policy should be front and center given the potential impacts on cash flow, investment location, and the business landscape generally.

With $4 trillion in tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA) set to expire at the end of next year, 2025 is going to be a big year for tax as Republicans and Democrats are expected to negotiate extending some of its provisions. Shifts in both parties since the TCJA was enacted make what either might do less predictable.

If Congress does nothing in 2025, the result would be a $4 trillion tax increase with roughly $3 trillion in taxes impacting individuals. The questions for both parties are: How much of that $4 trillion will they commit to , and how much will they pay for? Any unpaid-for amounts will add to the deficit, and there is a risk that this could create inflationary pressures. So, things that have never been easy to do are now even harder.

Even though no Democrats voted for the TCJA back in 2017, these expirations are potentially a big-ticket item for them in 2025; and a number of Democrats, including President Joseph R. Biden Jr., have publicly said that they are committed to extending some of the cuts for individuals who make $400,000 or less annually. Paying to extend those tax cuts will be expensive and could lead Democrats to return to their prior proposals to raise the corporate tax rate, raise taxes on wealthy individuals, and/or raise taxes on the cross-border activities of multinational companies.

While the historical assumption may have been that Republicans would want to extend all of the 2017 tax cuts, surprisingly only 5 of the 24 Republican tax writers who were on the House Ways and Means Committee in 2017 are still on the committee today. To what extent these new faces feel beholden to what was done in 2017 is an open question. This leaves uncertainty about how many of the expiring items Republicans would prioritize and whether—as well as how—they would pay for those extensions.

Regardless of who wins the presidential election, the White House is going to require Congress to take the lead on legislating a solution to the 2025 tax cliff.

Ultimately, the tax picture that emerges will be driven by a combination of budgetary, fiscal, and political realities, which makes it difficult to predict. Boards and audit committees should prompt deeper conversations with management about how their companies are preparing for a range of possibilities including by:

• Asking management about the type of scenario planning being done
• Understanding the variables that may be more “forecastable” and looking at the impacts on cash flow
• Considering how best to monitor state, federal, and global regulatory developments.

These and other considerations can help the board support management in thinking through various scenarios and positioning the company for the post-election policy and business landscape.

KPMG LLP is a NACD strategic content partner, providing directors with critical and timely information, and perspectives. KPMG LLP is a financial supporter of the NACD.

John Gimigliano is the leader of Federal Tax Legislative and Regulatory Services, KPMG LLP.