Doug McHoney, PwC’s International Tax Services Global Leader, teams up with Janice Mays, a veteran of tax policy with 40 years in government. Together, they dissect how the upcoming U.S. elections could reshape tax policy. They discuss key Senate and House races to watch, explore bipartisan challenges in tax reform, and examine the potential effects of election outcomes on corporate tax rates. The conversation also tackles the complexities of the GUILTY proposal and its implications for corporate adaptation amidst shifting political dynamics.
The upcoming US election may alter tax policy directions significantly, affecting potential expirations of the 2017 Tax Cuts and Jobs Act provisions.
Electoral outcomes could shape the US stance on OECD’s Pillar 2 framework, impacting multinational corporations based on party control dynamics.
Deep dives
Impact of the Pillar 2 Engine on Tax Compliance
PwC's Pillar 2 engine represents a revolutionary step in international tax compliance, providing advanced modeling and calculation capabilities for tax provisions. This unique tool leverages over 20 years of expertise in international tax technology, streamlining the compliance process for businesses navigating complex tax regulations. By centralizing the management of tax rules, it enhances efficiency and accuracy, allowing users to reduce errors and save time. The availability of this engine as a service highlights PwC's commitment to harnessing technology to aid global corporations in meeting their tax obligations.
Understanding U.S. Tax Policy Formation
Tax policy in the U.S. is shaped through a complex legislative process involving both Congress and the President, reflecting the nation's unique democratic structure. The House Ways and Means Committee plays a critical role as the constitutional originator of tax legislation, initiating discussions and hearings before proposing new bills. The process requires compromise and cooperation between the executive and legislative branches, with the need for a supermajority complicating the advancement of tax policy. Recent partisan divides have made it increasingly challenging to enact bipartisan tax bills, impacting legislative effectiveness.
Electoral Outcomes and Their Effect on Tax Policy
The upcoming election holds significant implications for tax policy, particularly with numerous provisions set to expire, including individual tax cuts from the Tax Cuts and Jobs Act of 2017. A mixed electoral outcome could lead to protracted negotiations, limiting immediate tax changes and potentially resulting in tax cuts expiring. Conversely, complete Republican or Democratic control could lead to substantial shifts in tax policy direction, with Republicans likely minimizing tax increases and Democrats pursuing rate increases for corporations and higher earners. The role of the electoral college and key swing states will ultimately determine these outcomes, making them critical areas of focus.
Future of U.S. Adoption of OECD Tax Provisions
The varying potential outcomes of the election could significantly affect the U.S. position on OECD's Pillar 2 tax framework, particularly under different party controls. A Republican sweep may lead to outright rejection of OECD guidelines, while a Democrat-controlled government could aim for broader compliance with international tax standards. However, internal party dynamics and the necessity for unification present both challenges and opportunities for tax policy adjustments. As discussions around tax legislation evolve, the interaction between U.S. tax policy and international agreements will remain a pivotal concern for multinational corporations.
Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Janice Mays (Managing Director in PwC’s Tax Policy Services) who boasts a 40 year career on the Hill including 22 years as the Democratic chief counsel and staff director for the House Ways and Means Committee, to discuss the upcoming US election’s impact on tax policy. Doug and Janice dive into the practice and procedures behind US tax policy, the upcoming US presidential election, and the key races to watch in the US Senate and House of Representatives. They also cover various election result scenarios, the key priorities for both Republicans and Democrats in a 2025 tax bill, and a potential US reaction to Pillar Two.
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