#TrumpTaxCuts

Donald Trump's tax cuts, also known as the Tax Cuts and Jobs Act (TCJA), were enacted in 2017 and have been a significant aspect of his economic policy. Here's what's happening with the tax cuts:

Key Aspects of Trump's Tax Cuts

- *Permanent Extension*: Trump has called for a permanent extension of the 2017 tax cuts, which would decrease federal tax revenue by $4.5 trillion from 2025 to 2034.

- *Economic Impact*: Extending the tax cuts would boost long-run GDP by 1.1% and increase after-tax incomes by 2.9% on average. However, it would also increase the budget deficit and push up interest costs by an estimated $941 billion.

- *Proposed Changes*: Trump's plan includes additional policies, such as:

- *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*: Creating a deduction for auto loan interest for American-made cars.

Impact of Trump's Tax Cuts

- *Increased Deficits*: Extending the tax cuts would add $4.6 trillion in deficits over 10 years, according to the Congressional Budget Office.

- *Inflationary Pressures*: Economists worry that extending the tax cuts would boost inflationary pressures and worsen America's fiscal trajectory.

- *Corporate Investment*: Studies show the TCJA increased corporate investment by 11%, but its effects on economic growth and median wages were smaller than expected.

Current Status

- *Budget Reconciliation*: The House and Senate have passed budget resolutions to start the reconciliation process, which allows for fast-tracked tax and spending changes.

- *Tariffs*: Trump has also proposed new tariffs, which could offset some of the economic benefits of the tax cuts. However, tariffs are considered a distortive way to raise revenue and may invite foreign retaliation.¹ ²