The short answer is no one really knows. During a recent hearing with the House Ways and Means Committee, Treasury Secretary Janet Yellen provided only limited details on how the Biden Administration plans to manage the expiring provisions of the Tax Cuts and Jobs Act (TCJA), which are set to phase out in 2025. Secretary Yellen underscored the administration’s commitment that there will be no new taxes for individuals earning less than $400,000 per year, echoing President Biden’s opposition to allowing tax cuts to expire for this income bracket. However, specifics about which tax provisions might be extended were not disclosed, only noting that the administration is prepared to negotiate these points with Congress.
The dialogue in the hearing also touched upon broader fiscal policies, including efforts to ensure that wealthier individuals and major corporations contribute a fair share to the treasury. Secretary Yellen also mentioned that the administration is advocating for an expansion of the Child Tax Credit in the latest budget proposal, signaling a focus on tax relief for families.
In addition to domestic tax policy, Yellen defended ongoing negotiations with the Organization for Economic Cooperation and Development (OECD), particularly the “pillar two agreement,” which aims to establish a global minimum corporate tax rate. This international tax agreement, she argued, supports objectives that are beneficial for the U.S. economy.
Another significant topic discussed was the IRS’s Direct File pilot program. Yellen reiterated recent statements from IRS Commissioner Daniel Werfel that the pilot is under evaluation to determine its effectiveness and future viability. This program could potentially simplify the tax filing process for millions of Americans.
For Connecticut small business owners and individuals, these discussions are particularly relevant. The potential changes in tax policy could have significant implications for tax planning and future financial strategies. As these negotiations continue and the specifics of the tax legislation become clearer, staying informed and consulting with us at Bailey Scarano will help you navigate the changing landscape effectively and optimize financial outcomes.