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01 OCT 2024 / TAXES
In a world where the economy is spinning like a Ferris wheel on overdrive, Election 2024 is adding another layer of unpredictability for accounting and finance professionals. Barry Melancon, the president and CEO of the American Institute of CPAs (AICPA), captured this uncertainty when he said, “The profession today is in a very unpredictable landscape. Young people have never known anything but this environment.” With the upcoming presidential elections stirring the pot even further, accountants are bracing themselves for what could be a rollercoaster of changes in tax and economic policies. Buckle up as we explore the twists and turns that lie ahead!
At the recent AICPA Executive Roundtable in New York City, Melancon laid out the complexity of the upcoming elections, highlighting how a split government could make tax decisions feel like untangling a bowl of spaghetti. If Republicans manage to take the Senate and the Democrats hold the House, we’re looking at completely different tax outcomes than if one party sweeps both chambers. In his own words, “We live in a world where the difference in who controls the House or the Senate will be a very narrow margin. That makes managing government very difficult.”
The tax landscape will certainly become a hot mess if there’s a divided government. It might be harder to reach compromises, and major tax legislation may take the backseat. For accountants, this means operating in a world where uncertainty becomes the name of the game. If the Democrats snag a win, expect corporate taxes to climb, and regulatory scrutiny to tighten. On the flip side, a Republican sweep might keep the corporate tax rates steady, with an emphasis on extending expiring provisions of the Tax Cuts and Jobs Act (TCJA), especially the R&E credit. But, to put it bluntly, a divided Congress might result in a whole lot of “wait and see.”
The battle lines are drawn, folks, and the two main contenders, Vice President Kamala Harris and former President Donald Trump, couldn’t be more different in their economic strategies. While Trump is out here promising a “manufacturing renaissance” with a sprinkle of tariffs on the side, Harris is pitching what she calls a “pragmatic” approach. It’s like watching an episode of “Shark Tank” where the investors are trying to sell you two wildly different visions for America’s future.
Harris, speaking to the Economic Club of Pittsburgh, laid out her plans to cut middle-class taxes, expand access to paid leave, and slash costs for child and elder care. She emphasized her commitment to a free market but with “consistent and transparent rules of the road.” On the other hand, Trump is sticking to his guns with a hard-nosed approach, vowing to impose tariffs on countries that don’t bend to his demands and promising to bring back manufacturing jobs.
A fun fact? Trump’s love for tariffs even made a Mint Hill, North Carolina, audience stay silent when he pledged to bring back furniture jobs. “I’m bringing them back,” he declared—but the crowd wasn’t exactly jumping for joy. Meanwhile, Harris took the opportunity to label Trump as someone who “got played by China” and accused him of being a “loser” when it came to manufacturing.
No matter who comes out on top in the election, it’s crystal clear that corporate tax policies are about to be under the microscope. Trump recently floated the idea of a 15% tax rate for domestic manufacturers, which might sound like a sweet deal, but it opens a Pandora's box of questions. For example, what even counts as “manufactured in America”? Meanwhile, Harris’ proposals suggest that she’ll push for more transparency and a fairer playing field. For accountants keeping an eye on the ball, it means preparing for a potential swing in tax policies that could hit everything from the corporate tax rate to bonus depreciation. As per A&M experts article below are the rates talked about:
Speaking of bonus depreciation, the clock is ticking. As it stands, the current 100% deduction has been ratably declining and will start phasing out completely by 2027. Will either candidate reverse this? It’s anyone’s guess. And let’s not forget about the ongoing debate around business interest expenses, R&D deductions, and international tax regimes. Tax professionals are already sweating just thinking about how these changes might play out.
Now, let’s talk about the money-makers—the millionaires and billionaires. Harris has been pretty vocal about wanting them to pay their “fair share,” pushing for a long-term capital gains tax rate of 33%. That’s a smidge less than the 44.6% proposed under the Biden Administration. Trump, however, remains tight-lipped on this, but one thing is for sure: whatever happens, wealthy individuals are going to feel the pinch in one way or another.
Oh, and remember the “carried interest loophole” that’s been around longer than a well-aged bourbon? It’s still a hot topic, with Democrats promising to close it, while Republicans are, well, not so enthusiastic. Tax pros, get ready to dig deep into your playbooks if this loophole gets the axe!
If you’re feeling like this whole election is a rerun, you’re not alone. Both parties seem to be dusting off old tax strategies from their previous campaigns, mixing in a little fresh rhetoric to keep things spicy. It’s like they’re serving us last night’s leftovers but with a side of salsa to make it seem new. If you feel like we're back in 2017, you're not alone. As the 2024 election heats up, the future of the Tax Cuts and Jobs Act (TCJA), international taxes, and the SALT cap is once again up for debate. Trump is eager to extend TCJA provisions, such as maintaining the 21% corporate tax rate and keeping the R&E credit intact, aiming to support domestic businesses and manufacturing. Harris, however, has a different playbook, planning to roll back parts of the TCJA by raising corporate taxes to fund her social programs and infrastructure projects.
When it comes to international taxes, Trump’s stance is all about keeping America competitive with low rates and using tariffs as a stick against countries that don't align with his policies. Harris, in contrast, wants to align with global tax standards, cracking down on profit shifting and supporting a stronger global minimum tax to ensure big corporations pay their fair share.
And let’s not forget the SALT cap tax—the $10,000 deduction limit that’s had taxpayers in high-tax states fuming. Harris is ready to lift or eliminate this cap, offering relief to residents in states like New York and California, while Trump is all about keeping it in place, arguing that it prevents high earners from benefiting too much. It’s the same old tax dance, but with new moves, and the stakes couldn’t be higher for accounting and tax professionals navigating this evolving landscape.
Let’s not kid ourselves—AI and technology are shaking things up like an earthquake at a house party. Melancon made it clear that AI will impact jobs, shifting people from entry-level roles to more advanced positions quicker than you can say “CPA Exam.” For accountants who are still on the fence about embracing technology, it’s time to wake up and smell the coffee. If you’re not up to speed with AI tools and automation, you might end up feeling like you’re in the Stone Age.
But don’t panic just yet—there’s still a lot of value in the human touch. Accountants who can combine their technical skills with advisory expertise will be the ones to thrive in this new landscape. So, if you’ve been putting off that AI course or ignoring the latest tech trends, now’s the time to get in the game.
In this unpredictable landscape, the stakes have never been higher for financial professionals. With the potential for changes in tax laws, AI regulation, and the broader economy, it’s a bit like walking a tightrope without a safety net. The only way forward is to stay informed, adapt, and be prepared for anything. And let’s face it, if you’ve made it this far in your accounting career, you’ve already got nerves of steel.
So, whether you’re Team Harris, Team Trump, or just trying to keep your head above water, remember: change is inevitable. The key is to roll with the punches, keep your calculator handy, and never let your pencil dull. The election might be a wild card, but with the right mindset, you’ll come out the other side stronger, smarter, and ready to tackle whatever the tax code throws your way.
And as the saying goes, “If you can’t stand the heat, get out of the kitchen.” But something tells me, accounting and tax professionals are here to stay, heat and all. Stay tuned for more such updates, and don’t forget to subscribe to our weekly newsletter!
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