During a bipartisan media roundtable event held by law firm K&L Gates on October 30, 2024, a question was posed to the panelists regarding some overlapping tax proposals floated by both presidential candidates along the campaign trail, such as the idea of exempting tips from taxation, and whether there might be the potential for bipartisan agreement on any of these promises in Congress regardless of the outcome of the election on November 5.
Potential for bipartisan agreement
“So there is this confluence that’s happening when you think about…no taxes on tips,” began Karishma Shah Page, co-leader of K&L Gates’ Public Policy and Law practice and former legal clerk for the House Committee on Foreign Affairs. She continued by explaining that despite the possibility of a divided government in Washington D.C., there are areas where bipartisan agreement could be reached on tax reform.
“There are going to be questions about what happens with…some of the…expiring Tax Cuts and Jobs Act provisions,” Page admitted, also noting that there are Inflation Reduction Act provisions with an expiration date to consider.
The “math problem” in tax reform
Although there may be a sense of optimism with areas of agreement when it comes to tax policy, she explained the “pretty big math problem” involved with any tax reform legislation involving these laws to the tune of “about a $4.6 to $8 trillion bill in an environment where we’ve been seeing some levels of inflation due to our debt and deficit loads.”
Page believes this may lead to “a lot of scrutiny about how we get to ‘yes’ on the package, and that’s going to be an even harder hurdle to get to if we…have mixed control of government.” But, she does think “that’s also going to lead to…some more resilient policy outcomes down the road.”
Congressional perspective
“You know, my experience in Congress is, a lot of times we could get agreement on what we wanted to spend, but we couldn’t get agreement on how to pay for it,” added fellow panelist Mike Doyle, Government Affairs Counselor at K&L Gates and former U.S. Congressman from Pennsylvania who served on the House Energy & Commerce Committee.
He stressed that this could be a more visible issue, particularly “if it’s a divided government and you have two parties controlling one of each chamber [of Congress]…”
Campaign promises versus reality
Doyle also noted that former President Trump “said he’s going to end the tax on Social Security, which would cause the fund to be insolvent a lot quicker than it is now” and chalked up such promises to the “presidential election talk” that occurs “on both sides” during these campaigns.
However, Doyle said he believes when Congress gets “down to the serious business of looking at these tax bills” there will be areas for compromise. “I think you’re going to see negotiations where…there’s some give on the Democratic side in return for some give on the Republican side, on those things in the tax bill that…each party favors,” he reasoned.
Doyle then went back to his and Page’s earlier points about how to pay for any tax reform legislation after the election on November 5. “Paying for the bill is going to be the big question,” he reiterated.
Possible bipartisan agreement on paid family and medical leave
Another area that may have the potential for bipartisan agreement after the 2024 presidential election is paid family and medical leave. Currently, paid family and medical leave laws exist at the state and local levels in several tax jurisdictions, but not at the federal level where instead there is the Family and Medical Leave Act (FMLA), which entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons.
However, both 2024 presidential candidates have previously indicated support for a paid leave policy at the federal level. During his presidency, Trump called for a paid family leave program and Harris proposed up to six months of paid time off for parents and caregivers when she ran for president in 2019 and during her current campaign for the office. Trump also recently promised a tax break for caregivers at a campaign rally.
In a separate discussion with Thomson Reuters on presidential election policy promises, Page believes that paid family and medical leave is also seeing progress in the private sector. “Leave is something that is viewed as being a really important competitive benefit and is responsive to some of the very significant struggles that parents and other types of family caregivers are struggling with,” she started. “And so you see the employer community really coming together pushing forward various proposals.”
Page additionally sees “some bipartisan action…in this space too,” because focusing “on how do you help caregivers is something that is very much a shared viewpoint right now” between the two political parties.
Planning for post-election tax policy
When it comes to advising tax practitioners and employers preparing for what may come on the tax policy side following the election on November 5, Page thinks that “from a planning perspective…the key…is recognizing that we have a very consequential election that’s going to have consequential policy outcomes.”
She noted that “it’s really hard to start planning from a compliance perspective,” since such changes would be generally unknown at this point, but to instead ensure there is advocacy for various important tax issues.
To illustrate this, Page pointed to a recent October 15, 2024 deadline for comment on TCJA provisions from the House Ways and Means Committee’s Republican Tax Team. “That’s a reflection of the fact that folks don’t know what the outcome of this election is going to be, but they’re [planning] about how to think about this debate,” she explained.
