The 2017 Tax Cuts and Jobs Act (TCJA) delivered federal income tax cuts for individuals at virtually every income level. The TCJA also delivered historic corporate tax cuts and reforms to make U.S. companies competitive with foreign rivals. 

While the corporate tax reforms are permanent, the individual tax cuts and other provisions are set to expire at the end of 2025.

  • Income tax rates will rise.
  • The standard deduction was doubled but will revert back, causing more people to itemize again.
  • The child tax credit was doubled and expanded to more households. It would be cut in half and available to fewer households.
  • The charitable deduction was increased and would revert back to its previous level. 

Other provisions that were limited or eliminated, such as the salt and local tax (SALT) deduction and mortgage interest deduction, would return to previous levels after 2025.

The question Americans will have to consider is how our national leaders will respond. Will they allow the tax cuts to expire, thereby raising taxes at a time when inflation remains high, or will they extend tax relief to individuals and stimulate the economy by reforming the tax code to spur economic growth?

President Joe Biden and former President Donald Trump will treat the tax cuts very differently.

What Trump said

In May, former President Trump told supporters:

Instead of a Biden tax hike, I’ll give you a Trump middle-class, upper-class, lower-class, business-class big tax cut. I will make the Trump tax cuts permanent. And we will cut your taxes even more than that.

What Biden said

President Biden posted on April 23 that he planned to let the expiring tax cuts stay dead.

How that gels with his promise not to raise taxes on households earning below $400,000 has yet to be explained. 

In addition, President Biden has proposed raising the corporate tax rate to 28%, up from the 21% set permanently by the TCJA.

Absent any action on the part of Congress or the next president, the individual tax cuts will expire, and beginning in 2026, most Americans will get a tax hike.

It’s incumbent on policymakers to come up with a plan to address these expiring tax provisions as well as to forge policies that will spur economic growth.

The fiscal impact of the tax cuts is being held out as a reason to allow TCJA provisions to expire. Fully extending the TCJA tax breaks could add an estimated $4.6 trillion to the deficit over the next decade. According to a Congressional Budget Office report, fully extending the TCJA would add an estimated $4.6 trillion to the deficit over the next decade.