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Republican election sweep emboldens Trump’s tax cut dreams

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The Republican sweep of the presidency and Congress has transformed what could have been a struggle to merely renew Donald Trump’s tax cuts into a multipronged campaign to slash levies in new and bigger ways.

The incoming Republican majorities in the House and Senate mean Trump can enact a tax bill without making concessions to Democrats. Republicans will only be constrained by how much deficit spending the party’s lawmakers and global financial markets can tolerate.

“That is the several trillion-dollar question,” said Rohit Kumar, co-leader of PwC’s national tax office and a former tax policy advisor to Senate Republican leader Mitch McConnell. 

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Donald Trump during a campaign event in Las Vegas

Ian Maule/Getty Images

Owners of closely held companies and high-net worth families stand to benefit with Congress now more likely to renew expiring provisions in the 2017 law providing a 20% deduction on pass-through business income and an elevated estate tax exemption, said Gordon Gray, a former Republican Senate Budget Committee aide and now executive director of the Pinpoint Policy Institute.

Many Democrats campaigned on a tax-the-rich agenda and advocated paying for other tax cuts by targeting those provisions, as well as rolling back the law’s tax cuts for corporations and individuals making more than $400,000 per year.

Republicans’ election success not only bolsters the 2017 tax cuts but opens the way for consideration of ideas such as further cutting the corporate tax rate and exempting tips from federal income taxes, said Grover Norquist, an influential voice in Republican tax policy debates and president of the conservative group Americans for Tax Reform.

Trump enthusiastically promoted both the corporate-rate reduction and the break for tipped income during the presidential campaign and also promised myriad other tax breaks.

The first thing Republicans will have to negotiate is how large the tax-cut package will be and how much they’re willing to increase a federal deficit that reached $1.83 trillion in the fiscal year that ended Sept 30. Just extending the expiring tax cuts would drive up deficits by $4.6 trillion over 10 years, and all of Trump’s campaign plans would add as much as $7.75 trillion, according to estimates by the Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group.

Stephen Moore, a senior fellow at the Heritage Foundation and informal Trump advisor, said the tax cuts will stimulate economic growth and Republicans can also cancel spending approved under President Joe Biden to help offset the cost of the cuts. Still, the bill is likely to have some level of deficit financing, he said.

That sets up a clash within the GOP between deficit hawks and lawmakers who don’t think revenue losses from tax cuts need to be offset, said Sage Eastman, a Republican strategist and former aide to the House Ways and Means Committee, which has jurisdiction over tax legislation.

Republican Senator Mike Crapo of Idaho, who is in line to chair the Senate Finance Committee, has said “pro-growth” tax policies don’t need to be paid for. The 2017 tax cuts did produce some positive economic effects, but they were far more modest than the Trump administration and some Republicans forecast, said Kyle Pomerleau, a senior fellow with the American Enterprise Institute.

“It will be important to watch to see if markets start to panic if enough deficit spending is being contemplated, or if they’ll decide to look through it,” said Martha Gimbel, executive director of The Budget Lab at Yale and a former White House economist under Biden.

Trump has vowed to impose a tariff of 10% to 20% on all imported goods plus 60% on Chinese products and promoted that as an offset for tax cuts. But lawmakers will have to decide whether to enact those tariffs in the tax bill so the revenue can be officially counted — a difficult vote for Republicans, especially those who want free trade. They could also just assume revenue would continue from presidentially imposed duties, even though Trump might later strike a trade deal that drops them.

“There’s always a way to make things work,” said Dave Camp, a senior policy advisor at PwC and a former Republican chairman of the House Ways and Means Committee.

The Peterson Institute for International Economics estimates the tariffs could raise only about $225 billion a year. Kimberly Clausing, a former Treasury Department official in the Biden administration and a UCLA professor of tax law, said the GOP will probably overestimate the revenue from tariffs and ignore the negative economic impact of the duties. 

Republicans have said they want to enact a tax bill within the first 100 days of Trump’s second term, though it’ll probably take longer to negotiate the details, Kumar said. 

The narrow GOP margin in the House gives small bands of Republican lawmakers leverage to demand specific tax breaks, and the Democratic strategy will be to focus on vulnerable Republican members in swing districts to push them to support or oppose individual provisions, said Scott Mulhauser, a Democratic strategist and veteran of legislative policy battles.

The Republican “trifecta” also sets up a lobbying free-for-all among business groups to persuade lawmakers and the White House to create new tax breaks to boost their industries. That intensifies the internecine struggle among Republicans over what to include in the package and how to contain the cost.

Skeptics said they doubt all of the tax cuts Trump proposed during the campaign — which grew so numerous that even some of his advisors are unclear about which proposals he’s most committed to — would be enacted because of the cost and difficulty of instituting the entire list.

Trump promised he would restore the full value of the state and local tax deduction, or SALT, a popular break in high-tax states including New York, New Jersey and California. Trump’s signature tax law capped the value of that deduction at $10,000, regardless of marital status.

While some changes to SALT such as raising the cap or doubling the deduction for married couples filing jointly are possible, eliminating the limit entirely isn’t likely because of the revenue loss: $1.2 trillion over 10 years, according to the Committee for a Responsible Federal Budget.

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IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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