Tax Policy and the 2024 US Election: A Crucial Battle Over Pillar Two

As the 2024 US presidential election approaches, tax experts are weighing in on what a second Donald Trump presidency could mean for US tax policy, particularly in relation to the OECD’s pillar two initiative. With the two major parties deeply divided on the issue, the outcome of the election—and the makeup of Congress—will play a pivotal role in shaping the future of US tax regulation.

Tax specialists, including those at Grant Thornton and EY, have pointed out that while Trump has previously expressed a desire to reduce the US corporate tax rate to 15%, the likelihood of such a cut under a new administration is uncertain. Dustin Stamper, managing director at Grant Thornton’s Washington national tax office, cautions that even with a Trump victory, lowering the corporate tax rate further would be difficult due to concerns over the national deficit and the cost of extending expiring tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA).

“Because they have some real deficit concerns, and there’s a whole bunch of other expiring tax provisions at the end of 2025 which they like very much and are a high priority and which they’d like to extend but are very costly,” Stamper said. He also noted that Trump’s other campaign promises, such as eliminating taxes on tips and Social Security, are "very expensive campaign promises" that would further complicate any plans to reduce the corporate tax rate. As a result, Stamper suggests that a corporate tax cut under Trump may not be likely, particularly given his recent shift toward more populist tax policy rhetoric.

However, some experts remain optimistic that Trump could push for lower corporate taxes. Samuel Tae, principal for international income tax consulting at Ryan in Georgia, points to Trump’s track record with the TCJA in 2017 as evidence of his commitment to reducing the tax burden on US corporations. Tae argues that if Trump were to win the 2024 election, he would likely aim to keep the corporate tax rate at 21% or potentially lower it further.

In contrast, Democratic presidential candidate Kamala Harris has already signaled her intent to raise the corporate tax rate to 28% if elected. This stark difference between the candidates underscores the significance of the upcoming election in determining the direction of US tax policy.

One controversial element of Trump’s tax policy discussions is Project 2025, a policy framework developed by the conservative Heritage Foundation. Although Trump has distanced himself from Project 2025, a CNN review found that many individuals from his previous administration were involved in its creation. Despite this, Stamper believes Project 2025 will have limited impact on Trump’s tax policies, should he win a second term. “Trump can be unpredictable with some of the ways he can change course on taxes. But he does have already a pretty extensive tax record,” Stamper remarked. He suggested that while Project 2025 might influence other areas, it has not played a significant role in the discourse on tax policy.

The future of the OECD’s pillar two policy is another key area where the election could have significant implications. Experts like BDO’s Todd Simmens and Stamper of Grant Thornton view the upcoming election as pivotal for the future of pillar two, given the sharp divide between Democrats and Republicans on the issue. Democrats, according to Stamper, are eager to align US international tax rules with the pillar two framework to prevent revenue loss to other countries. “If the US companies are going to be paying the tax anyway, they might as well be paying it to the US Treasury instead of to a foreign government,” Stamper explained.

Republicans, however, remain highly skeptical of the OECD’s initiative, viewing it as a bad deal for the US. Stamper suggests that a Trump administration would likely resist implementing pillar two in the US, opting instead for “reciprocal taxes or tariffs” as a retaliatory measure against its adoption elsewhere.

The composition of Congress will be a crucial factor in determining the feasibility of any significant tax policy changes under either a Trump or Harris administration. On November 5, alongside the presidential election, voters will also elect members of Congress, including all 435 seats in the House of Representatives and 34 of the 100 seats in the Senate. The results will have a significant impact on whether the next administration can extend the expiring provisions of the TCJA or pursue new tax initiatives.

Jose Murillo, EY Americas international tax and transaction services leader, emphasized that Trump’s ability to extend the TCJA provisions without introducing new taxes to fund them will depend heavily on the balance of power in Congress. Similarly, BDO’s Simmens noted that a divided government could make it challenging to achieve consensus on long-term tax policy changes, though short-term agreements might still be possible.

As the election approaches, it is clear that the outcome will have far-reaching consequences for US tax policy, particularly in relation to the OECD’s pillar two framework. The battle over tax policy in 2024 will likely extend beyond the presidential race, with the composition of Congress playing a decisive role in shaping the future of US taxation.