What is the Future of the Tax Cuts and Jobs Act?
The Tax Cuts and Jobs Act (TCJA), implemented in 2017 during the Trump administration, is a key fiscal policy issue post-2024 elections. Set to expire in 2025, there is a debate on whether to extend or let it lapse, impacting tax rates, the federal budget, and economic growth.
The TCJA lowered corporate tax rates, decreased individual income tax brackets, and enhanced deductions like the Child Tax Credit. However, several provisions, especially relating to individual taxes, are scheduled to end in 2025.
Economists at Wells Fargo outlined potential scenarios following the election. A full expiration would mean tax increases in 2026, tightening fiscal policy but not likely causing a recession. Extending the TCJA in full would significantly add to the federal deficit, though it may not drastically alter economic growth projections.
Policy changes post-election will depend on the outcome. Republicans lean towards extending or expanding the TCJA, while Democrats may opt for a partial extension. Vice President Harris supports extending tax cuts for those earning under $400,000 annually but letting them expire for higher earners.
The decision on the TCJA awaits the 2024 election results. A Republican victory could mean a full extension or further tax cuts, while a Democratic win might lead to a limited continuation. Regardless, any changes are not expected to impact the economy until 2026, allowing time for negotiation.
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Emma Collins, graduated in Financial Economics from the University of Chicago in the USA in 2016. She has since worked at an asset management firm in New York, where she specializes in investment strategies and portfolio management. Emma has a keen interest in financial analysis and has published several articles in renowned financial journals. Her work focuses on providing actionable insights to investors, and she is known for her forward-thinking approach to managing financial portfolios.