Reforming Tax Policy: Ideas for Stability and Growth

On Tuesday, November 5th, the American people voiced their support in a powerful way, placing control of all branches of the federal government in the hands of the Republicans under President Trump. As the new administration prepares to take office, a critical tax policy change looms: the expiration of the Tax Cuts and Jobs Act (TCJA) at the end of 2025. With tax reform on the agenda, I have some ideas that I believe would bring stability, encourage investment, and help revitalize struggling areas.

1. Make 100% Bonus Depreciation Permanent

The current policy of gradually phasing out bonus depreciation by 20% each year until it hits zero in 2027 is creating uncertainty. Instead of this cycle of temporary extensions and percentage adjustments, Congress should establish 100% bonus depreciation as a permanent feature of the tax code. This policy gives investors, developers, and business owners the confidence they need for long-term planning. Locking in 100% bonus depreciation would encourage investment, drive development, and spur economic growth, especially in underdeveloped areas. Congress has an opportunity to pass this legislation in early 2025, making it retroactive to 2024 so taxpayers can benefit immediately.

2. Fix the R&D Tax Credit

The Research & Development (R&D) Tax Credit needs an overhaul. Currently, the amortization requirement penalizes American businesses by forcing them to spread out deductions over five years instead of allowing a full deduction in the first year. Get this corrected for the 2024 tax year.

3. Capital Gains Tax Relief for First-Time Homebuyers

On the residential side, we need policies that increase the availability of homes for first-time buyers. One potential solution: allow investors who sell rental properties to first-time homebuyers to bypass capital gains and recapture taxes on the sale. By doing so, we could open up more housing inventory and make homeownership more accessible to younger generations. This concept, inspired by my friend and colleague Craig Kamman, offers a practical approach to addressing housing supply and affordability.

4. Update the Capital Gains Exemption for Homeowners

The current capital gains exemption for homeowners—$250,000 for individuals and $500,000 for married couples—has been in place since 1997. Given the significant increase in housing prices over the past two decades, these thresholds no longer reflect today’s real estate market. Adjusting the exemption to $1 million for individuals and $2 million for couples would reflect current home values, reduce tax burdens for sellers, and better align with housing inflation.

John Murphy