Populism has been on the rise around the world in recent years, and its rise in the United States has serious implications for how lawmakers will handle the year ahead. $4.6 trillion tax cliff.

In broad terms, populism manifests itself in public policy as proposals aimed at raising working-class families. These populist perspectives can topple traditional priorities, such as those of big business or other perceived political elites, as lawmakers seek to appeal to voters who feel left behind. Each party has its hobby horses: on the left are the ultra-rich and on the right are often legacy institutions such as The Ivy League school. And proposals targeting wealth and perceived elites have a real chance of becoming law next year.

This is because it is not safe to assume that either party will stick to the way it has traditionally approached tax policy. Things used to be more straightforward. Democrats would trade tax cuts for other priorities, such as investing in social services, and Republicans would pursue pro-growth, business-friendly tax breaks. Populist trends are bending the traditional left-to-right ideological spectrum into something resembling a political horseshoe, with the far left and far right more closely aligned on economic issues.

Indeed, we have seen many populist proposals with bipartisan support. Strange bedfellows emerge, like Sen. JD Vance (R-OH), Trump's newly minted vice president, and Sen. Elizabeth Warren (D-MA), a leading progressive, teaming up to introduce the legislation targeting bank executives whose institutions fail. If you don't believe us, maybe take Senator Vance in his word: “The people on the left, I'd say, whose politics I'm open to – are the Bernie Bros.”

A serious change

This marks a serious change from our political environment when Congress cut the corporate tax rate by 40% (from 35% to 21%) and temporarily lowered individual tax rates across the board in 2017. Populist proposals are no longer on the sidelines. President Biden has his The minimum income tax on billionaires (which actually taxes wealth and hits individuals with more than $100 million), and former President Trump's idea of excluding tips from income taxesa clarion call to working-class individuals made it to the 2024 Republican National Committee platform. The proposed exemption also quickly gained support from Nevada's Democratic senators, one of whom (Sen. Jacky Rosen) is facing a tough re-election in the state with more tipped workers per capita than any other in the country. Talk about weird bedfellows.

Predicting the future is difficult, and the polls still don't give a clear picture of who will control Washington next year. But most Republicans and Democrats are racing to preserve some of the trillions of dollars in tax cuts that expire next year (ie, the $4.6 trillion tax cliff). Many on the right, including the House's top tax writer, Rep. Jason Smith (R-MO), are open to further tax cuts through targeted measures focused on working class families. So potentially costly tax cuts will be on the table next year regardless of who wins the White House and who controls Congress.

Targeting the rich

Maintaining the cuts and potentially adding new ones, especially for wealthy individuals and small businesses, will be expensive, and balloon debt is raising concerns, meaning lawmakers will likely seek revenue to pay for those cuts next year. When you combine these deficit concerns with rising populism on the left and right, proposals targeting groups with wealth or perceived power and status can gain traction in ways not seen in recent years. If we find ourselves in a divided government, those strange populist fellows may have an even better chance of advancing their proposals.

With the billionaire tax proposed by Biden and REVIEWS by other top Democratic tax writers, Democrats have clearly signaled that they will look to the wealthy to raise tax revenue. On the right, we can look back at the 2017 tax season, when several populist proposals found their way into a larger tax package.

To help pay for Trump's 2017 cut in the corporate tax rate, GOP lawmakers limited deductions on state and local taxes, a provision that disproportionately raised taxes on earners and wealthy individuals in high-tax blue states . The move was largely seen as political retaliation against Democrats and an appeal to Republican lawmakers in low-tax red states. The TCJA also enacted a 1.4% excise tax on the largest college and university endowments as a payment. Like the cap on state and local tax deductions, many saw the move as an easy move for liberal elites. In 2025, lawmakers may build on these provisions and can go after other groups of wealth, such as legacies, charitable dollars and private equity.

If it's impossible to tell exactly which populist tax policies are on the table, that's because all the proposals seem to be. What was a trickle of populist policies in 2017 could turn into a wave in 2025, depending on the election. Democratic and Republican tax positioning is poised to become more focused as we approach November, but for now, what's clear is that populists on the left and right see next year as a major opportunity to make a mark. in the Tax Code.

Sara Barba and Sandra Swirski contributed to this article.

For more information on tax policy in 2024 and 2025, see “Setting the table for tax policy this year and next“and”President Biden releases budget proposal for fiscal year 2025.”