Why Congress must extend the Trump tax cuts

As a new Congress convenes and begins to work on our country’s most pressing issues, we will hear much more about the Trump tax cuts, formally known as the Tax Cuts and Jobs Act. Enacted in 2017, the tax cut package signed by then-President Trump was passed using a parliamentary procedure called “reconciliation.”

Reconciliation allows the Senate to bypass the filibuster rule that requires 60 votes to pass a bill. All that is needed to pass a reconciliation bill is a simple majority. That’s the upside.

The downside is that the reconciliation process has specific rules and limitations that govern its use. As a result, many of the tax cuts in the TCJA had to be made temporary to meet the budgetary requirements of reconciliation.

That’s why they will expire unless Congress acts to extend the Trump tax cuts by the end of 2025.

The result will be a $4 trillion tax hike (over 10 years) on Americans.

At a time when Americans are struggling with higher prices, higher taxes are something they just cannot afford. That’s why Congress must protect prosperity by extending and improving the Trump tax cuts.

To refresh your memory, the Trump tax cuts lowered taxes and simplified the tax code.

The law reduced individual tax rates for taxpayers, widened the tax brackets, doubled the estate-tax exemption, and doubled the child tax credit.

On the simplification side, the bill nearly doubled the standard deduction, got rid of the personal and dependent exemptions, cut some loopholes and subsidies, significantly increased the amount not subject to the alternative minimum tax, and limited what taxpayers could claim via itemized deductions. The net effect of all these changes was a reduction in what Americans paid to Washington.

So, did the Trump tax cuts work? Yes!

Before Covid and the destructive policy changes of Bidenomics, the TCJA had a significant and immediate positive impact on the economy.

In the two years after enactment, real median household income increased by $5,000, and real wages rose by 4.9%.

Until the pandemic hit, the economy had created 5 million new jobs, and the unemployment rate fell to 3.5%. The economy grew an entire percentage point faster than projected.

Inflation-adjusted median income hit an all-time high of $78,250 in 2019.

Lastly, because the TCJA made our corporate income tax rate more globally competitive, American companies essentially stopped moving operations overseas, and we saw a 20% increase in new investment.

Oh, and inflation was under 2%. In fact, when Trump left office, inflation was just 1.4%.

The economy grew, corporations stopped moving overseas, we created more jobs, and, after years of stagnation, take-home pay grew.

Under Bidenomics, take-home pay has declined when adjusted for inflation, underscoring that now is a rotten time to raise taxes.

Of course, to hear opponents of the Trump tax cuts tell it, all the TCJA did was blow a big hole in the deficit. (As if the big spenders ever cared about that!) But it’s not true.

Through 2025, tax revenues will be $620 billion more than the experts predicted. If we project out another five years, we’re looking at $2.7 trillion more revenue than initially projected.

If the critics are looking for the real culprit for our debt and deficit woes, it’s spending.

The Congressional Budget Office reports that federal revenues were 17.2% of the overall economy (GDP) in 2024, right at the 30-year historical average of 17.3%. Spending, however, is another story. It was 24.2% of GDP in 2024, far more than the 30-year historical average of 21.0%. CBO says it will be almost 25% in 10 years.

The numbers don’t lie — government has a spending problem.

So, before the politicians even think about taking another dime in higher taxes, they need to get spending under control. That’s why it’s so important that we all encourage Congress to extend the Trump tax cuts for all taxpayers. If we do that, along with cutting government spending and regulations, we can once again have a booming economy with low inflation.