The Big Tax Hike Coming in Just Over a Year

Joe Weisenthal (0:03)

Bloomberg Audio Studios.

Tracy Alloway (0:05)

Podcasts, radio, news.

Joe Weisenthal (0:20)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:25)

And I'm Tracy Alloway.

Joe Weisenthal (0:27)

Tracy, can I say something that I think is a little silly about US politics, or US policy making?

Tracy Alloway (0:32)

What an intro, Joe. The answer is always.

Joe Weisenthal (0:35)

So I'm sure there's plenty of things about our US system of government that could be improved upon, in theory. But I'm aware that for various rules that exist in DC, we often pass these laws that just expire. And I think it has something to do with, I don't know, reconciliation and the deficit and the filibuster and all these things, where you pass a law and it seems fine, whatever. And then if you don't do anything, it just goes away in 10 years. It actually seems very hard to pass a law that has any sort of permanence, especially if it changes to government spending or taxation. It seems very hard to make permanent substantial changes to our fiscal policy.

Tracy Alloway (1:17)

I have to say, when you mention it's been 10 years, that's kind of amazing. So you are specifically talking about the 2017 Tax Cut and Jobs Act, aka the Trump tax cuts. Those went into effect in 2018, and many of the cuts are scheduled to expire at the end of 2025 So by 2026, if we don't have any change, if we don't go about doing it all over again, then we could see tax increases.

Joe Weisenthal (1:49)

Right. Like currently, if nothing happens, if we were to get sort of gridlock after November, or just nothing happens, there is this tax hike that is existing law, says starting in 2026, I believe, some taxes are going to go up. I don't know exactly what they are. We'll learn what they are. But yeah, right now, we are on course for tax hikes. Now, every politician, I think, on either side of the aisle would probably say at least for some constituency, some income groups, we don't want this to happen. We don't want taxes to go up for Americans earning less than $400,000. That's something Democrats say from time to time, things like that. But it doesn't matter if every side doesn't want it to happen. You still need some sort of compromised law to replace the existing law. And there's no guarantee of that because politics is politics. And so as of right now, yes. But so it is a something for people to recognize. And B, I think it's also important to understand what is the existing tax code? What did we change? Why did we have this change under the Trump administration?

Tracy Alloway (2:51)

I find the process of actually designing tax policy really interesting. And I have a lot of questions. And a lot of it stems from my first ever encounter with US taxes. I was living in London at the time.

So I had to file things like the Foreign Earned Income exclusion and stuff like that. And I remember receiving this 400-page book from the IRS on how to do your taxes. And it would say, for box 78A, turn to page 328 And I would turn to the page and there would be nothing there of relevance. And I remember sitting on the floor of my living room in London and crying over this paperwork and this admin that I had to do. So America's tax system seems incredibly complicated to me. I don't even know how you start to make changes to it. And I am very interested to learn.

Joe Weisenthal (3:45)

Well, I am happy to say we literally have the perfect guest because we are going to be speaking with the architect of the Tax Cut and Jobs Act, former chairman of the Ways and Means Committee, Kevin Brady, the senior consultant now at Aiken Gump. Kevin Brady, thank you so much for coming on Odd Lots.

Kevin Brady (4:02)

Joe, thanks for having me. This is exciting.

Joe Weisenthal (4:05)

We're really excited about this. Why don't we start at that? Politicians come in, they say we're going to cut taxes, right? We've heard it forever and Trump was no different in that respect. But there's a difference, I think, maybe between saying we're going to cut taxes and the idea of comprehensive tax reform that affects both households, that affects corporations, etc. When you went, you're considered to be the architect of the TCGA. When you went into this project of reforming US tax code, which I believe was the first time the tax code was reformed in over 30 years at that point, these things do not come, the stars do not align often for this. What was your goal?