Tax Day came and went this week, much to everyone’s chagrin. Whether you owed money or received a little extra, we all have to come to terms with how much the state and federal governments are pulling from our paychecks. While DOGE is busy making sure that our tax dollars are spent wisely, Congress is working to reduce the tax burden through the reconciliation process.
On the cusp of a two-week Easter recess, the House passed the Senate amended budget resolution last week that unlocks the door to crafting a reconciliation package. Although there was some uncertainty from the Senate on whether or not tax cuts would be included, the House succeeded in having them included in the final resolution. With the 2017 Tax Cuts and Jobs Act (TCJA) expiring at the end of this year, it is imperative that it be extended. The budget resolution is now making that happen by providing $1.5 trillion for the Finance Committee to prevent any tax hikes by including TCJA’s policies.
We all have benefited from TCJA, which simplified the tax system and lowered tax rates. One area of taxes that it addressed was the “death tax.” This type of estate tax would require families who inherit property to pay a tax when it changes hands. This is in addition to the taxes already paid on the property. In some cases, family farms, ranches, and small businesses have to be sold off because there is not enough extra money to cover the taxes. TCJA doubled the death tax exemption. Senate Majority Leader John Thune (R-S.D.) also introduced legislation to eliminate the tax. Thune said of his Death Tax Repeal Act (S. 587):
The death tax is fundamentally flawed both in theory and in practice. There should be a limit to how many times the government can tax you. The money you leave at your death has already been taxed by the government at least once, which makes the death tax double taxation. And the government isn’t even profiting all that much from this double taxation… I hope that 2025 will be the year that we permanently bid farewell to the death tax.
If Republicans are not successful in extending the policies of TCJA again in the reconciliation bill, as Representative August Pfluger (R-TX) puts it, “Americans will be crushed by the largest tax hike in history.” The median individual taxpayer will see a nearly three percent increase in their tax rate. The standard deduction, child tax credit, and the death tax exemption will be cut in half. For example, a family of four who earns $80,610 would see an increase of $1,695 in their tax filings. Small business owners will see an increase in their tax rate up to 43.4%. Additionally, the state and local tax (SALT) deduction is currently capped at $10,000, but without TCJA, the cap would be lifted. The cap on SALT saved the federal government about $500 billion per year. The burden on Americans would be crippling if Republicans don’t act swiftly.
The child tax credit (CTC) is one mandatory spending stream addressed in the reconciliation bill. Several members have introduced legislation to support this incentive, one of which may be included in the final legislation. Senator Mike Lee (R-UT) introduced the America First Act (S. 62) would codify the current CTC level at $2,000 per child. Sen. Jim Banks’s (R-IN) bill, the Family First Act (S. 1382), would increase the CTC to $4,200 for each child five years old and younger, $3,000 per child for those six years old and older, and $2,800 for pregnant moms. Senate Democrats have proposed their own bill, the American Family Act (S. 1393), that provides a similar structure with an even more increased amount, but provides these credits to those who do not pay income tax. With any credit that is implemented, work and citizenship requirements are essential.
An additional tax provision that we would like to see in the reconciliation package is one that was introduced recently by Sen. James Lankford (R-OK) and Rep. Greg Steube (R-FL). The Safeguarding Charity Act (S.1428/H.R. 2918) protects tax-exempt organizations from the overreach of the federal government. This bill would confirm that a tax-exempt status is not the same as receiving federal funds. Schools, non-profit organizations, and churches should not be treated as direct government grantees. Politically motivated lawyers have blurred this line to scrutinize pastoral messages, private school policies, and the normal activities of nonprofits. Placing this language in the reconciliation package would protect our taxpayer dollars from frivolous lawsuits that violate the Constitution.
The House and Senate have a lot of work ahead of them to piece together a reconciliation package that Republicans can unite around while giving the American people long-awaited financial relief. Eagle Forum commends the Leadership of both chambers for moving swiftly and strategically. Make sure you are signed up for our emails and alerts in order to keep up-to-date as the reconciliation bill begins to move.
