The Tax Impact if Democrats Take the House
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. The polls would have us believe there's a good chance Democrats will retake control of the House of Representatives in Tuesday's midterm elections. But what would that mean for taxes? We'll spill out the details in a moment. First, these money and market stories you should know.
What immediate economic and labor trends set the scene for tax discussion?
The Wall Street Journal heard on the street team says that companies dealing with higher labor costs as a result of the current tight labor market could face even higher costs down the road. As the unemployment rate fell below 4% earlier this year, workers are no longer as scarred by the job losses that occurred following the financial crisis, and they know a job switch can be very lucrative given how tight the job market has become. Heard on the Street says at the pace of last year's employment and population growth, the unemployment rate would slip to 3.1% by next October. And even if hiring slows as expected, an unemployment rate closer to 3% than 4% seems likely. And a study by the anti-poverty nonprofit group Food Research and Action Center says 1 in 10 households with seniors age 60 and older receive Supplemental Nutrition Assistance Program, also known as Food Stamps.
U.S. Census Bureau data from all counties in the U.S. shows the rate of food stamp usage by seniors remains mostly consistent. That's about 10% of senior homes in metropolitan areas, 10% of those in small towns, and 11% of those in rural areas participate in food stamps. However, out of the 50 counties with food stamp participation above 25%, 75% were rural and only 15% were metropolitan.
All politics may not be local, but all politics are connected in some way to our wallets. And with the midterm elections coming up, the question arises, how would a shift in power in Congress affect taxes and in turn our own finances? Well, who better to ask than Wall Street Journal tax reporter Richard Rubin, who joins us now from our Washington bureau. So, Richard, you write in your story in the journal that in large part, if Democrats were to take control of the House, the tax bill in large part passed last year would be safe.
How could Democrats retaking the House influence which 2017 tax law provisions expire?
Yeah, look, President Trump isn't going anywhere between now and the end of 2020, for sure. So it's really hard to imagine the kinds of wholesale changes that Democrats have talked about actually turning into law with the president still there and with the likelihood at this point, as we speak now before the election, of having a Republican Senate still.
And for all the division in Washington, though, both parties can tag parts of the tax bill that they're satisfied with.
Yeah, look, when Democrats... complain about the tax law. They have a whole litany of concerns that they have. But there's certainly things in there that Democrats wanted to do to increase the child tax credit, to change the way that international businesses are taxed, to lower the corporate tax rate, even maybe not as far as Republicans did all the way to 21 percent. But Democrats were talking along those lines, too, under the Obama administration. So don't expect Democrats to come in for the most part and just say, let's just repeal the tax law that passed. First of all, it's not going to happen. And second of all, they like some of the things that are in there.
And there are some tax rules that are set to expire by the end of 2019 that could face the Democratic red pen, if you will.
Which expiring deductions and breaks might Democrats target to reshape tax policy?
What are some of the changes that you see potentially that could be coming?
So we've got a couple of provisions, a bunch of provisions that actually expired at the end of 2017. We've got the expanded deduction for medical expenses that expires at the end of this year. We've got breaks for alcohol producers and for family leave that expire at the end of 2019. And all those are sort of forcing events. So that sort of basically creates a situation where there might be a tax bill for lawmakers to consider. And when that happens, whoever's in power will have the ability to shape that somewhat.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–0:22
2
What immediate economic and labor trends set the scene for tax discussion?
0:22–2:15
3
How could Democrats retaking the House influence which 2017 tax law provisions expire?
2:15–3:26
4
Which expiring deductions and breaks might Democrats target to reshape tax policy?
3:26–5:09
5
How might changes to the state and local tax (SALT) cap become a political flashpoint?
5:09–6:11
6
If Republicans keep the House, what are the three likely tax priorities they would pursue?
6:11–6:36
7
What is the status and uncertainty around the president’s proposed 10% middle‑class tax cut?
6:36–6:42
Speakers
2 identifiedMore from WSJ Your Money Briefing
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