Although a recent Congressional Budget Office analysis predicts that extending the 2017 Tax Cuts and Jobs Act will cost about $4 trillion over the next decade, Republicans argue that failing to extend the TCJA will result in widespread economic suffering.
Scheduled to sunset in 2025, the TCJA has reduced average tax burdens on singles, married joint-filers, and businesses across the income spectrum, as well as doubled the Child Tax Credit.
If those tax provisions expire, the average taxpayer will see a 22% tax hike, and 90% of all taxpayers will see their guaranteed deduction cut by half.
U.S. Rep. Jason Smith, R-Mo., who chairs the House Committee on Ways and Means, dismissed the latest CBO data showing that TCJA-spurred economic activity may not cover the cost of revenue loss and could increase the deficit.
“Forty million families will see their Child Tax Credit – a pro-family policy that was created, and later doubled, by Republicans to provide families relief and support – slashed in half,” Smith stated Thursday. “Congress must act as soon as possible to eliminate this threat of a higher tax burden and give families peace of mind.”
Smith also claimed that the CBO “is simply not equipped to calculate the costs of the totality of all pro-growth policies that President Trump has pledged,” such as the proposed Department of Government Efficiency (DOGE), which would allegedly address more than $3 trillion of the TCJA’s projected new costs.
According to the CBO, the currently $36 trillion U.S. national debt will exceed its record high of 106% of GDP by 2029, threatening a possible fiscal crisis in the near future. While Smith and other Republicans believe that decreasing federal spending in other areas will cover revenue loss from a TCJA extension, most Democrats argue that continued tax cuts are flat out unsustainable.
“Two decades of Republican tax cuts have exploded our national debt,” U.S. Rep. Brendan Boyle, D-Pa., said during a congressional hearing Thursday. “We are missing $10 trillion in revenue cumulatively just because of the tax cuts we’ve had ever since 2001. I don’t think the response to those long-term structural issues and our rising national debt is to compound those issues with a new $4.6 trillion in debt because of extending the tax cuts in the TCJA for another decade.”
The federal government ended fiscal year 2024 with a $1.8 trillion deficit, and has run a deficit every year since 2001. Total federal liabilities and unfunded social insurance obligations now exceed $125 trillion, growing faster than the U.S. economy.
But Republicans insist that tax cuts are needed now more than ever to provide families and small businesses with relief, given record-high inflation under the Biden administration.
If the TCJA expires, approximately 26 million small businesses would be hit with a 43.4% tax rate, potentially damaging the economy over the short and long-term.
“The goal of the Tax Cuts and Jobs Act was to get the economy going – and it succeeded,” U.S. Rep. Ron Estes, R-Kan., said on X last week. “In next year’s tax reform negotiations, we need to make sure that we don’t go backwards, but keep the good provisions that will boost workers, farmers, manufacturers, innovators and the economy.”
