Plans to Address TCJA Expirations
With large parts of the Tax Cuts and Jobs Act (TCJA) provisions set to expire at the end of Calendar Year (CY) 2025, lawmakers will soon face crucial decisions about the future of U.S. tax and fiscal policy. While a strict extension of the TCJA could end up adding $4 to $5 trillion to ten-year deficits, expirations also offer an opportunity for thoughtful, responsible, and pro-growth tax reform. Encouragingly, a number of experts from the left, right, and center have already put forward fiscally responsible plans for 2025 tax reform that policymakers can reference as they prepare their own plans.
You can find the full-size summary table of the plans here. We will continue to track plans and update this table as new plans are released.
Plans: Clausing-Sarin | Pomerleau-Schneider | Progressive Policy Institute | Tax Foundation | Cato | CRFB Budget Blueprint
Based on our Build Your Own Tax Extensions tool, extending all of TCJA’s individual and estate provisions that are set to expire at the end of 2025 would add $3.9 trillion ($4.5 trillion with interest) to deficits through 2035 and increase debt by 11 percent of Gross Domestic Product (GDP). Also extending, reviving, or avoiding various business provisions and other expiring policies would boost that cost to $5.2 trillion ($6.1 trillion with interest), leading debt to rise by 14 percentage points to 139 percent of GDP by 2035.
Use the Build Your Own Tax Extensions tool here.
The high cost of extending the TCJA alongside an already unsustainable debt trajectory means that 2025 could be a disastrous year for the nation’s long-term fiscal and economic stability. But as discussed in our recent event, When the TCJA Expires: A Tax Policy Summit, 2025 could also be an opportunity to enact thoughtful tax reform that builds on the parts of TCJA that worked well, abandons or reforms the parts that worked poorly, introduces new offsets and policy changes, and ensures adequate revenue generation to improve the nation's long-term fiscal outlook.
Already, a number of plans and frameworks have been put forward to achieve these goals, such as those published by Kimberly Clausing and Natasha Sarin, Kyle Pomerleau and Donald Schneider, staff of the Progressive Policy Institute (PPI), staff of the Tax Foundation, Adam Michel at Cato, and the Committee for a Responsible Federal Budget (CRFB).
Across these plans there is a great deal of overlap in policy recommendations. Repealing the alternative minimum tax, extending or expanding the state and local tax deduction (SALT) cap and addressing workarounds, allowing the expiration of the 20 percent pass-through deduction known as 199a, limiting other deductions, and reviving full expensing for research and experimentation are common recommendations across the plans. Most of the plans also extend the TCJA's repeal of the personal and dependent exemptions in favor of a larger standard deduction and child tax credit.
The plans also differ significantly in some ways, especially when it comes to the individual tax rates, the estate tax, and various corporate tax provisions.
A common theme across the plans is the aim for TCJA extensions and tax reform to be at least deficit neutral over time, and some generate substantial revenue increases, acknowledging the nation’s deteriorating fiscal health. Like the authors of these plans, policymakers should approach 2025 as an opportunity for thoughtful tax reform that is pro-growth and fiscally responsible. These plans and the Build Your Own Tax Extensions tool can assist policymakers in designing that reform.
We will continue to track new ideas that address the TCJA and regularly update our comparison table as additional plans are introduced.
