Forget about your Fan Duel bets on who will win the Stanley Cup. In 2025, the question with real money implications (think billions) is whether or not the new administration and Congress will extend the provisions of the Tax Cuts and Jobs Act past 2026.
Arguments for allowing the TCJA to sunset:
- Deficit reduction: Allowing the TCJA to expire would increase tax revenue, potentially reducing the budget deficit.
- Addressing income inequality: The TCJA has been criticized for providing larger tax cuts to high-income households, and its expiration could help reduce income disparities
- Restoring pre-TCJA tax policies: Some policymakers may prefer returning to previous tax rates and deductions
- Fiscal responsibility: Expiration could be seen as a step towards more sustainable long-term fiscal policy
Arguments against allowing the TCJA to sunset:
- Economic impact: Extending the TCJA could boost GDP by 1.2% over the long run and support an additional 829,000 full-time equivalent job
- Avoiding tax increases: Allowing the TCJA to expire would result in a significant tax hike for 62% of tax filers, with an average increase of $2,853 per taxpayer
- Political considerations: Some lawmakers may face pressure from donors and constituents to extend the tax cuts
- Simplification: The TCJA simplified some aspects of the tax code, and its expiration could reintroduce complexity
What would change if the TCJA expires? And what to do to plan for it? Stay tuned for next week’s blog on a quick summary and some tips to prepare.
Sources:
https://taxfoundation.org/blog/extending-tax-cuts-budgetary-impact/
https://www.brookings.edu/articles/a-fixable-mistake-the-tax-cuts-and-jobs-act/
