Tis the Season for Gifting–But The Rich Expect Their Biggest Presents Next Year
It’s holiday gift-giving season, but for America’s richest households and most profitable corporations, the biggest presents could come next year in the form of massive tax cuts.
By William Rice
It’s holiday gift-giving season, but for America’s richest households and most profitable corporations, the biggest presents could come next year in the form of massive tax cuts. Working families had better enjoy the current holidays because 2025’s tax-cut bonanza for the wealthy will be no gift to them.
Following are some of the costliest goodies wealthy individuals and huge corporations hope to receive in the new year—and how redirecting that generosity towards working families could make future holiday seasons brighter for ordinary Americans.
A Shiny Loophole for Rich Business Owners: The 2017 Trump-GOP tax law created a new break for unincorporated businesses: the right to subtract one-fifth of their profits before figuring their taxes. Often falsely dubbed a “small business tax cut,” this “pass-through” loophole is actually a wasteful giveaway to hedge-fund managers, Wall Street lawyers, real-estate developers like Donald Trump and other super-rich business owners. This year over half the loophole’s benefit went to business owners with household income topping $1 million.
Next year is supposed to be the last year of the pass-through loophole: the Trump law called for it to expire at the end of 2025. But “Santa’s helpers for the rich” up on Capitol Hill want to permanently extend it—at a cost of $684 billion in lost tax revenue over the next decade. If we didn’t give it away to the wealthy, that would be enough money to make Christmas a little merrier for millions of working families by making pre-school free for all four-year-olds and cutting the cost of childcare.
A Brightly Wrapped Special Break for the Highest Income Households: Rich people can use deductions, credits and other breaks to whittle down their tax obligations to little or nothing. That’s why the Alternative Minimum Tax (AMT) was created. The Trump tax law weakened the AMT, allowing more wealthy people to avoid paying their fair share. The stronger rules are slated to return in 2026, but Republicans in Congress aim to make the looser rules permanent. That would cost $1.3 trillion in foregone tax revenue over 10 years, with about half of that going to households with over $400,000 of annual income. That roughly $650 billion would be enough to make Hanukkah happier for working families if we instead used it to expand premium subsidies on health insurance purchased through the Affordable Care Act and lowered housing costs.
An Estate-Tax Gift Bag: Economic family dynasties destabilize our economy, demoralize our society and endanger our democracy. Huge inherited wealth undermines the twin American values of equal opportunity and personal initiative. The estate tax is the only federal curb on economic dynasties—which is why Republican politicians with wealthy donors dislike it so much.
The latest assault on the tax came in the 2017 Trump tax law, which doubled the amount of family fortune exempt from the tax. After seven years of inflation adjustments, next year $28 million per couple will be able to flow down to the next generation without paying a penny of estate tax. The exemption is scheduled to drop to the still very generous level of roughly $14 million in 2026—but Republicans have vowed to prevent that strengthening of the tax. If they succeed, we’ll waste $167 billion over 10 years making rich families richer, when we could instead make Kwanzaa more joyous for working families by lowering the cost of home- and community-based care for older and disabled Americans.
Other baubles are awaiting the well-off and well-connected next year: likely Congressional votes to forestall a higher top tax rate for couples with income of nearly three-quarters of a million dollars; the restoration of three business tax breaks that save huge corporations billions of dollars; and the continuation of the “opportunity zones” program that is just another opportunity for developers to exploit communities and get even richer.
Gift-givers often wrestle with the question: what do you get someone who has everything? The Republicans who will run the government next year seem to have offered a simple answer to that question when it comes to tax cuts for the wealthy: even more! But that’s not the spirit of the holidays. Here’s hoping the incoming administration and Congress take a tip from the current season and reconsider who really needs their benevolence next year.