Thursday, June 6, 2024
MADISON, Wis. – According to a new report by the Committee for a Responsible Federal Budget, extending portions of the Trump-era tax plan, which is set to expire, would cost significantly more than previous estimates. In total, these extensions would cost 50 percent more than previously expected – topping $4 trillion through 2034.
Congress has proposed multiple pieces of legislation to extend or make permanent key components of the Trump-era tax plan, also known as the TCJA, which has primarily benefited the wealthiest Americans and big corporations.
In Wisconsin, Congressman Bryan Steil is a co-sponsor of H.R. 976. If this bill were passed, the richest 1% of Americans would see a $44 billion tax cut in 2026 alone. Both Steil and Congressman Derrick Van Orden are also co-sponsors of H.R. 4721, which also contains major tax giveaways to those at the top. Both bills would make the pass-through business tax deduction permanent, a provision that disproportionately benefits owners of large, successful businesses, including oil and gas companies, who use this loophole to avoid paying their fair share of taxes.
“We need fair tax policies that help working families and seniors get ahead. These policies prioritized the wealthy and big corporations and left Wisconsin families to shoulder the burden,” said Opportunity Wisconsin Program Director Meghan Roh. “Now, Congress has the opportunity to let these costly and unfair tax breaks for the rich expire, and instead find solutions that help grow the middle class and improve the economy for everyone in our state.”
Committee for a Responsible Federal Budget: Tax Cut Extensions Cost 50% More
Extending certain parts of the Tax Cuts & Jobs Act (TCJA) would cost $4 trillion through 2034, according to new estimates from the Joint Committee on Taxation (JCT) published by the Congressional Budget Office (CBO). These revenue loss estimates have increased dramatically compared to prior estimates.
Comparing the cost of extending major elements of the TCJA over common years, we estimate:
The cost of extension has grown by roughly 50 percent since the first extension estimate back in 2018, the equivalent of $1.2 trillion through 2034.
While inflation and economic growth explain some of the difference, the costs of the tax cuts as a share of GDP have increased by about 30 percent (0.3 percentage points) since 2018.
The higher cost of extensions is the result of both larger cost estimates for tax cuts and smaller revenue estimates for base broadening.
Major elements of the 2017 TCJA are scheduled to expire in 2025, including individual income tax rate cuts, a near-repeal of the Alternative Minimum Tax (AMT), expansions of the standard deduction and child tax credit in place of the personal exemption, limits to the SALT and other itemized deductions, and cuts to the estate tax. 100 percent bonus depreciation for business equipment purchases is also phasing out. (Design your own solution with our Build Your Own Tax Extensions model).
The CBO and JCT have produced estimates on the net cost of extending most of these tax cuts at least five times – in 2018, 2019, 2022, 2023, and 2024. Each time, the nominal cost has risen.
Since each estimate covers different budget windows and a slightly different set of policies, it is helpful to focus on the large policy extensions that all estimates have in common and look to a common year – our analysis focuses on fiscal year (FY) 2028.1 In 2018, CBO estimated extensions of these policies would cost $286 billion in FY 2028; that estimate increased to $311 billion in CBO’s 2019 estimates, $340 billion in 2022, $366 billion in 2023, and $416 billion in 2024.
In other words, the annual cost of extension increased by 46 percent, or $131 billion, between 2018 and 2024. The gap is a bit higher (52 percent) through FY 2027, and – based on this and other available data – is likely to be similar or perhaps a bit lower beyond 2028.
Continue Reading
###
