Posted on Friday, March 28, 2025
|
by Sarah Katherine Sisk
|
9 Comments
|
The 2017 Tax Cuts and Jobs Act (TCJA), the signature legislative achievement from President Donald Trump’s first term, is set to expire at the end of this year. Without action from Congress, millions of Americans will face automatic tax increases that could devastate the economy after four years of hardship under Joe Biden.
While the end-of-year deadline may yet seem a long way off, Republicans’ historically slim majority in the House and Democrat obstructionism in the Senate means preserving the Trump tax cuts will be a battle to the finish. AMAC Action has launched a citizen-led campaign so Americans can urge their legislators to make the tax cuts permanent, which you can add your name to by clicking here.
When it was passed eight years ago, the TCJA fundamentally reshaped the American tax landscape. Key provisions included reducing the corporate tax rate from 35 percent to 21 percent (bringing the United States more in line with other developed democracies), nearly doubling the standard deduction, expanding the Child Tax Credit, and lowering nearly every individual income tax bracket.
The law maintained the seven-bracket rate structure but shifted the income thresholds, effectively changing how much income would be taxed at each rate. This means that while the number of brackets remained the same, the amount of income that fell into each bracket was modified, resulting in lower tax liabilities for many taxpayers.
The result was that middle- and working-class Americans saw massive reductions in their tax burden. According to a careful analysis of IRS data, filers making between $15,000 and $50,000 “enjoyed an average tax cut of 16 percent to 26 percent” the first year the TCJA was in place.
Filers who earned $50,000 to $100,000, meanwhile, saw a tax break of 15 percent to 17 percent. Those earning $100,000 to $500,000 saw a tax break of 11 percent to 13 percent. Those who earned more saw a smaller tax break.
In other words, the taxpayers who made the least benefitted the most, contrary to baseless claims from Democrats and liberal economists.
The TCJA also implemented significant changes to business taxation, including new rules for pass-through businesses and international corporate taxation, with the primary goals of stimulating economic growth and providing tax relief to middle-class families.
The success of these tax cuts is clear in the data from the pre-pandemic Trump economy. Wages and job growth soared, and small business optimism reached an all-time high.
According to the Tax Foundation, making the Trump tax cuts permanent now would double down on those gains, boosting long-term U.S. economic output by 1.1 percent and encouraging economic growth and rising wages.
Americans would also receive on average about a 2.9 percent boost in after-tax income if these cuts are made permanent, compared to letting them expire. For a family that makes $100,000 per year, that’s an extra $2,900 to spend on groceries, gas, medical bills, and saving for the future.
But the economic implications of the TCJA extend far beyond immediate tax relief. The Tax Foundation’s comprehensive analysis reveals that permanent extension would create substantial long-term economic benefits as well. Specifically, the tax cuts would boost the capital stock by 0.7 percent and create approximately 847,000 full-time equivalent jobs.
The TCJA’s corporate tax provisions have been particularly crucial to economic growth. The law’s reduction of the corporate tax rate significantly improved business competitiveness. When these provisions expire, companies will face higher tax burdens, potentially reducing investment, limiting job creation, and slowing economic expansion. Small businesses will be especially vulnerable to these potential tax increases.
Though some critics express concern about the impact on the deficit, recent Department of Government Efficiency efforts have exposed billions in wasteful government spending that could be easily eliminated to offset potentially lower revenues. The federal government wasted $236 billion in improper payments last fiscal year alone.
Moreover, when the Trump tax cuts were passed in 2017, overall tax revenue actually increased because the economy was booming and Americans were making more money. While critics slammed the TCJA’s corporate tax cuts as a handout for wealthy companies, corporate taxes increased from $230 billion in FY 2017 to $405 billion by FY 2022 – all while those companies were able to pay higher wages to their workers.
The real solution isn’t higher taxes, but smarter spending. Economic research suggests that reducing federal spending inefficiencies could boost GDP growth by up to 10 percent and long-term growth by 7 percent, proving that strategic budget optimization is far more effective than simply extracting more money from taxpayers.
Make no mistake, the threat to your wallet from the expiration of the TCJA is real and imminent. When 2026 arrives, every American taxpayer will face painful changes unless Congress acts. The doubled standard deduction that simplified tax filing for millions would be gone. The estate tax exemption would plummet from $13.6 million to around $5 million, threatening family businesses and farms that took generations to build. The enhanced Child Tax Credit that helps working parents would be slashed.
The choice is clear — Americans can either maintain the tax relief that has helped millions of families or return to higher taxes that will burden working Americans. By joining AMAC’s campaign, Americans aren’t just protecting their own financial interests, they’re standing up for fiscal policies that benefit the entire country.
Sarah Katherine Sisk is a senior at Hillsdale College pursuing a degree in Economics and Journalism. You can follow her on X @SKSisk76.
Read the full article here
