President Trump's tax cuts, also known as the Tax Cuts and Jobs Act (TCJA), were enacted in 2017 and are set to expire soon. Here's what you need to know:
Key Provisions
- *Individual Income Tax Cuts*: The TCJA reduced tax rates for individuals, nearly doubling the standard deduction and increasing family tax credits. However, these cuts are set to expire in 2025.
- *Corporate Tax Rate*: The TCJA reduced the corporate tax rate, which has boosted corporate investment by an estimated 11%. Some provisions expire in 2028.
- *State and Local Tax (SALT) Deduction*: The TCJA limited SALT deductions to $10,000. Trump has proposed restoring this deduction.
Proposed Extensions and New Cuts
- *Extending TCJA*: Trump has called for permanent extension of the 2017 tax cuts, which would decrease federal tax revenue by $4.5 trillion from 2025 to 2034.
- *New Proposals*: Trump has also proposed additional tax cuts, including:
- *No Taxes on Tips*: Exempting tips from income tax.
- *Overtime Pay*: Exempting overtime pay from income tax.
- *Social Security Benefits*: Exempting Social Security benefits from income tax for retirees.
- *Auto Loan Interest Deduction*: Creating a deduction for auto loan interest for American-made cars.
Economic Impact
- *GDP Growth*: Extending the TCJA could increase long-run GDP by 1.1%, offsetting $710 billion of the revenue losses.
- *Budget Deficit*: However, extending the TCJA would add $4.6 trillion in deficits over 10 years, according to the Congressional Budget Office.
- *Tariffs*: Trump's proposed tariffs could offset more than two-thirds of the long-run economic benefit of his tax cuts