Donald Trump’s second-term success depends on his getting a substantive tax cut bill passed—and quickly. A sluggish and inflation-scarred economy was the biggest factor in sinking the Democrats in November.
That fact should spur Republicans to push through a huge tax reduction in 2025 as fast as possible. President Trump’s 2017 tax bill expires at the end of next year. Not renewing it—and, indeed, enhancing it with more tax cuts—would seriously damage the economy going into the 2026 congressional elections, giving democrats a decisive advantage. Democrats in control of both the House and the Senate would be hell for the White House and the GOP leading up to the 2028 presidential election. It would, needless to say, hurt most Americans—and the world.
GOP control of the House today is already precarious. Moreover, most Senate seats up for grabs in 2026 are held by Republicans, which makes their maintaining control of that chamber difficult.
The Trump team should start putting together a tax cut proposal ASAP. A running start come January could create critical momentum in getting a package fast-tracked through both congressional chambers through the reconciliation process.
There’s an urgent need for not only preserving the 2017 tax cuts but also adding new reductions to insure real prosperity. We’re in a shaky situation today because too much GDP growth depends on government spending, which badly needs to be reined in.
Delaying a big tax cut bill delays a big boom. To make investment and hiring decisions, businesses and entrepreneurs need to know what the rules of the game will be. Ditto for individuals dealing with their own financial situations.
This isn’t theory. The big tax rate reductions of Ronald Reagan’s first term were fatally phased in, which meant that the real punch didn’t come until 1983, two years after the Gipper took office. The economy suffered from the delay, and the Democrats made sizable gains in the House in the midterm elections.
A similar mistake was made in Donald Trump’s first term. The tax bill was delayed, not passing until December 2017. A year of extra growth was lost, and Republicans were decisively defeated for control of the House, with Nancy Pelosi becoming Speaker.
Republicans shouldn’t again fall into the trap of delay.
A big bill must, of course, include making good on President Trump’s promises concerning tips, Social Security and a 15% corporate tax rate for domestic profits. In addition, slashing the capital gains tax, now almost 24%, would give the economy a needed boost.
The beauty here would be twofold. First, a lower rate would stimulate investment and higher prices for equities, both good things for the economy. Second, it would instantly raise more revenue because people would be more willing to realize gains. Every time the capital gains levy has been cut, revenues have immediately gone up.
The GOP should also reduce personal income tax rates. Ronald Reagan did this, and the results were magnificent. Republicans might also expand federal income tax brackets so that as people’s incomes go up, they’re not hit as soon by landing in a higher tax bracket, which would boost incentives.
As for the limits on state and local tax deductions, David Hoppe, an experienced Washington hand, has noted in the Wall Street Journal that the issue could be handled by “changing the current language [in the 2017 bill] to eliminate the marriage penalty for couples filing jointly.”
New tax cuts should be made retroactive. Imagine the positive impact on the nation’s morale if later in 2025—or January 2026, at the latest—people notice a big boost in their paychecks.
Another factor the GOP must keep in mind: tariffs. Depending on circumstances, President Trump will likely impose some. We’ll need big tax cuts to help offset them.
Republicans should remember that their political fortunes—and the well-being of the nation—depend on a vibrant economy. And that rests on a great—and immediate—tax bill.
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