Even though the calendar still reads 2024, many observers in Washington have begun planning for 2025. Regardless of who wins control of Congress in November’s elections, the decisions lawmakers make in the year ahead will have a major effect on the nation’s fiscal direction.
While a new president and new Congress always bring changes, provisions in law guarantee a budgetary “Big Bang” next year. Most of the individual income tax provisions of the 2017 tax law expire at the end of 2025, as do expanded Obamacare insurance subsidies enacted by President Biden and Democrats during the last Congress. Negotiating — and posturing — over this large “fiscal cliff” will likely consume much of the new 119th Congress that begins in January.
Negotiating Positions
While we don’t yet know the players in this negotiation, the positions of either side seem fairly clear. If granted one-party control of Congress and the executive, Donald Trump and Republicans would likely use budget reconciliation to extend most or all of the tax relief enacted during Trump’s first term as president. On the other hand, Republicans would likely allow the increased Obamacare subsidies — which have been plagued by recent reports of fraud, not to mention the fact that they flow to wealthy individuals — to expire by not taking action.
If they have complete control of Washington next year, Kamala Harris and the Democrats would take the inverse approach. They would likely use reconciliation to enact a permanent extension of the Obamacare subsidies — or
