WASHINGTON — At the forefront of the Republican agenda as they prepare for the presidency of Donald Trump, along with a GOP majority in Congress, is the ambition to renew approximately $4 trillion in expiring tax cuts. This focus reflects their commitment to the Tax Cuts and Jobs Act, which was enacted during Trump’s prior term.
Recently, the U.S. Treasury published a new evaluation detailing the potential financial implications of extending the individual and estate tax measures linked to the 2017 tax overhaul. This analysis outlines not only the cost to the government but also highlights who would gain the most from the ongoing tax benefits.
For example, the Treasury’s Office of Tax Analysis has indicated that if the individual and estate tax provisions were to be fully extended, the top 0.1% of income earners could see an average tax reduction of $314,000. The total fiscal impact of these cuts could reach an estimated $4.2 trillion over the period from 2026 to 2035. Conversely, should the tax cuts be limited to families earning $400,000 or less annually — a commitment made by President Joe Biden and Vice President Kamala Harris during their campaign for 2024 — the financial burden of extending these provisions would decrease to $1.8 trillion, which is less than half of the overall cost of maintaining all expiring tax cuts.
A spokesperson from the Treasury conveyed that this comprehensive analysis is designed to offer Congress various options as they face the task of determining how to fund these tax cuts, particularly with federal debt surpassing $36 trillion. The Tax Cuts and Jobs Act is recognized as the most significant tax reform in a generation and stands as a cornerstone of Trump’s domestic policy, likely influencing his potential return to the presidency.
Trump is advocating for the full extension of all expiring tax provisions, while Republican lawmakers are also focused on reducing federal expenditures. Balancing these objectives will undoubtedly complicate negotiations in Congress. In addition to extending tax cuts, Trump has introduced measures during his campaign aimed at supporting working and middle-class citizens. This includes proposals to exempt certain types of earnings, like tips and overtime wages, from being taxed.
Additionally, lawmakers are mulling over the possibility of temporarily increasing the $10,000 limit on state and local tax deductions for most married couples. According to estimates from the Committee for a Responsible Federal Budget, this action could result in a revenue decline of about $170 billion.
Republicans are also looking to eliminate energy tax credits established under Biden’s Inflation Reduction Act and to reverse the tax increases imposed on the wealthiest individuals. It’s important to note that most of the modifications to the individual tax structure made by the TCJA are temporary and scheduled to expire at the close of 2025.
A report from the Urban-Brookings Tax Policy Center in July suggested that households earning approximately $450,000 or more would gain over 45% of the benefits from the extension of critical provisions of the 2017 act. Furthermore, the Penn Wharton Budget model predicts that making the TCJA provisions permanent would push the deficit up by $4 trillion in the following decade.
Republican leaders assert that these tax reductions are essential for driving economic growth, as reduced tax rates are believed to encourage increased economic activity. Prominent figures from the U.S. Chamber of Commerce highlighted in an August report that “many of the provisions of the TCJA were designed to foster greater economic growth.”
