(The Center Square) – Tennessee residents could have an additional $2,660 tax burden if the 2017 Tax Cuts and Jobs Act expires, according to a study by the National Taxpayers Union Foundation.
The report’s authors recommend that Tennessee officials look at protecting tax code elements included in the 2017 bill in case Congress does not extend the cuts before the Jan. 1 deadline. Tennessee follows the federal tax code.
The state’s net operating loss policies, which are “less generous” than the federal, should also be reconsidered, the report said.
Tennessee’s potential tax burden if the cuts expire is second only to Georgia at $2,680 among the Volunteer State’s neighbors. Mississippi would have the least impact of the states surrounding Tennessee at $1,570 per taxpayer, according to the report.
More than 80% of Americans could see higher taxes, the organization said in its report.
“The standard deduction used by over 90% of taxpayers will be cut in half,” the report said. “The $2,000 child tax credit will fall to $1,000 and will be phased out for more taxpayers. Higher tax brackets will kick back in, as will a lower estate tax threshold.”
A letter sent to U.S. Rep. David Schweikert, R-Ariz., from the Congressional Budget Office shows the tax cuts could add $37 trillion over the next 30 years, according to previous reporting by The Center Square.
The nonprofit Committee for a Responsible Federal Budget said in a March report the cuts could hurt the economy in the long run.
“While CBO finds the TCJA extensions would boost output over the next decade, they find that the higher debt load from deficit-financed extension would negatively impact the economy over the long run while also pushing up interest costs,” it said. “By FY 2054, CBO estimates that GDP would be 1.8% smaller and the average interest rate on federal debt would be 29 basis points higher relative to its baseline scenario.”
The National Taxpayers Union Foundation presented another scenario where an increase in business taxes would also cause the GDP to decrease if the tax cuts expire.
“On the business side, investment in new equipment will be literally taxed through reduced expensing, internationally-sourced income will face higher rates, and the Section 199A deduction used by 25 million small businesses will go away,” the report from the foundation said. “All told, taxes will increase by $500 billion a year, with an economic impact enough to reduce wages by 0.5% and Gross Domestic Product by 1.1%.
Taxpayers in other regions would be impacted more than those in the South, according to the report. Massachusetts is the most affected, with a $4,848 tax increase, followed by Washington ($4,567) and California ($3,768).
