Today is the deadline for many Americans to render unto Caesar. As checks are mailed and accounts are drafted, many wonder what the president can do to ease the nation's tax burden.
Pete Sepp of the nonprofit National Taxpayers Union Foundation (NTUF) told American Family Radio Tuesday that the answer hinges on something Donald Trump cannot do alone – extend the 2017 tax cuts Congress ushered through during his first term.
Some of Trump's proposals include exempting Social Security benefits, overtime pay, and tips from income tax while also creating an itemized deduction for auto loan interest. But as lawmakers continue considering budget reconciliation legislation, the ball is in their court.
If Congress does not act, the tax cuts will expire.
"The bottom line is a typical middle class family could face a tax increase of $2,000-$3,000 unless we act on this tax relief and make sure it's extended before the year is out," said Sepp.
The 2017 Tax Cuts and Jobs Act has several key features, including a child tax credit worth $2,000. That will become worth only $1,000 if the cuts are not extended.
Across-the-board tax rate reductions will also expire.
"Suddenly families will find themselves in a 25% bracket when they were in a 15- or 20% bracket," Sepp told show host Jenna Ellis. "That can't happen. That's going to be a huge tax increase."
The short game and the long game
Sepp went on to break down Trump's efforts to lighten the tax burden.
"The short game is making sure we prevent a $4 trillion-plus tax increase that will happen unless we extend the 2017 tax cut law," he explained.
The long game involves a major system overhaul, such as moving to a flat rate income tax or a national retail sales tax.
"Those questions are going to have to wait for the more urgent matter, which is making sure those 2017 provisions are extended," Sepp noted.
He said extended tax cuts will likely be part of the bill that will eventually be sent to Trump, but that does not mean getting there will be an easy process.
"Both the House and the Senate have different approaches to it," Sepp told Ellis. "The thing is Congress has a habit of bickering over small details and not getting the job done until the very last minute."
Passing the bill without the drama would remove a lot of pressure from businesses and families who are trying to figure out how to plan their finances in the year ahead amid Trump's tariff plan and its frequent changes, which have caused daily movement in the markets.
"There's a lot of anxiety over inflation; there's anxiety over interest rates," said Sepp. "Some of that anxiety can be taken away if Congress and the president work together to extend these taxpayer relief provisions."
Meanwhile, a recent NTUF study shows Americans spend 7.1 billion hours and $465 billion just to comply with the federal tax system.
No fix will be fast.
"Those burdens didn't happen overnight," Sepp asserted. "Year after year, the gradual passing of laws and rulemakings, deductions, credits, the clawbacks added to the tax system have created that complexity."
Likewise, change must come incrementally.
NTUF is calling on private and public sector volunteers to come together every four years to review the tax code line by line, striking provisions that no longer make sense or are economically unproductive.
That type of focused, intentional, gradual reining of a bloated system could present Congress with one meaningful tax bill to pass.
States leading the way on tax reform
"We'll start making progress towards simplification, and in doing so, we'll get to a flatter tax system, or maybe one where we can just ditch the whole thing and look at a retail sales tax," Sepp said. "States are doing that now. They've used that method, and the federal government can, too."
The latest state to do away with income tax is Mississippi, where Republican Gov. Tate Reeves recently signed a bill for its gradual phasing out. It reduces the sales tax on groceries from 7% to 5% but increases the gasoline tax by nine cents over three years.
Still, no real federal tax reform can come without a major change at the Internal Revenue Service, where the no-can-do attitude is unsustainable.
"There needs to be a detailed plan for modernizing this agency, a punch list to achieve that plan, and an oversight body to make sure that the IRS is staying on track," Sepp submitted.
