Are Corporate Tax Hikes on the Table?
Author: Greg Valliere
May 1, 2025
WE’RE NOW IN A FRENZIED STRETCH on Capitol Hill as members of Congress fight for their pet tax ideas, which could be included as a tax bill markup gets serious. One problem — how to pay for all the goodies.
A KEY PREMISE IN THE BILL is that there will be $800 billion in spending cuts, especially “waste, fraud and abuse” that may warrant Medicaid cuts. But all Democrats and a handful of Republicans are strongly opposed to big reductions in Medicare outlays; the final number will be far below $800 billion.
SO THE TAX WRITERS, desperate for revenues, are taking another look at some corporate tax hikes, an idea that was shot down by President Trump earlier this spring. The new target is corporate tax write-offs for salaries of highly compensated individuals.
NOT ONLY WOULD THIS RAISE several billion dollars, but it might defuse Democrats’ assertions that the measure favors only the rich. An article describing this tax maneuver was first published in this morning’s Wall Street Journal.
LIMITING THOSE DEDUCTIONS would raise taxes on corporations and could indirectly hit high-income households, perhaps in a more politically palatable way than the top marginal income tax-rate increase on millionaires, according to the Wall Street Journal article.
THE RESULTING REVENUE could offset some of the tax cuts in the bill, including extensions of expiring provisions from the 2017 tax law and Trump’s plans to eliminate taxes on tips, overtime pay and Social Security benefits.
HOW TO TAX BIG PAY PACKAGES is one of many proposals and details that Republicans are weighing as they try to enact Trump’s various campaign promises and extend the pieces of the 2017 tax cuts that are scheduled to expire on Dec. 31.
THE JOURNAL ARTICLE asserts that the toughest part is finding spending cuts and revenue-raising provisions to counteract the plan’s effect on budget deficits. Businesses have already been pushing back on another possible provision—a limit on companies’ ability to deduct some state and local taxes.
RESOLVING THESE ISSUES will take time; it could be late summer before a tax bill comes into focus. And squabbling over many of these issues prompt us to conclude that there’s perhaps a 40 percent chance the bill could stall.
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