When I woke up this morning I discovered yet another impossible item just happened (the Cubs really did win the World Series, right?). The media was saying that Hillary Clinton was going to be President. Oops. So what will President-Elect Trump likely mean for taxes?
1. John Koskinen will soon be the ex-IRS Commissioner. This is one prediction I’m very confident in. Republicans believe that he is one of the reasons we don’t know who ordered the IRS scandal. President-Elect Trump will ask for his resignation and get it.
1A. We will know the truth behind the IRS scandal within two years.
2. Obamacare will die. Even if Hillary had been elected, it’s been clear that the measure’s days were numbered. From a health care standpoint, I have no idea what (if anything) will replace it. But Obamacare is still unpopular, unworkable, and insane; its loss will be grieved by only a few.
From a tax standpoint, this means that the Net Investment Income Tax could also die, along with the additional Medicare tax. I’m far more confident in predicting the death of Obamacare than guessing what its replacement will be. It’s definitely possible we’ll see the status quo ante come back.
3. A tax reform package will be introduced and gain traction, but the end result will be a compromise. Democrats didn’t win the Senate, but do hold enough seats to filibuster. It’s more likely that we will see business tax reform pass than personal tax reform. However, this will be the best opportunity for real tax reform since the 1986 tax reform.
4. There’s no chance of overall federal tax rates increasing in the next four years. Zero.
5. But there’s also state taxes, and in yesterday’s elections we saw so-called “blue” states generally pass tax increases (California and Maine). We will continue to see small businesses migrate away from high-tax states to low-tax states. There’s a corollary that will be happening: Pie-in-the-sky blue state projects such as California’s train to nowhere will be getting no federal funding. (That train isn’t going to be running in the next four years.) Similar projects nationally will also die.
6. None of this will impact 2016 taxes. In a rare (perhaps unique) intelligent act, Congress changed the tax law for both 2015 and 2016 so we know exactly what 2016 taxes will be.
7. Another major impact will be the Supreme Court. There’s now no chance that Merrick Garland’s nomination will move forward. It’s far more likely a conservative will be nominated for the Court. I’m definitely the wrong person to ask on what the impact will be on this, but this is another certain impact of Trump’s victory. It’s also probable that President-Elect Trump will have at least one other Supreme Court nomination during his term in office.
8. President Obama believes in regulations; President-Elect Trump has publicly stated that for each new regulation two existing regulations will be eliminated.
9. President Obama used executive orders to implement large portions of his agenda. President-Elect Trump has stated he will rescind those orders when he takes office. Most of these do not deal directly with tax policy, but there will be indirect impacts.
Overall, the times are a-changing. We’ll start getting a flavor for the new administration when President-Elect Trump start naming his cabinet officers and other appointments