by Steve Dewey
The Tax Cuts and Jobs Act (TCJA) signed into law by President Donald Trump on Dec. 22, 2017, provided across-the-board income tax cuts for all income levels as well as significant tax relief for American taxpayers. However, most of the tax relief expires on Dec. 31, 2025, which will result in significant tax hikes for most Americans in 2026.
Republican presidential candidate Donald Trump and Republicans in Congress are calling for new legislation in 2025 to make the TCJA tax cuts permanent. But this will only be possible with three election results this November: (1) Trump wins the presidency; (2) Republicans gain majority control of the Senate; and (3) Republicans maintain majority control of the House of Representatives. Failure to achieve a victory sweep for the presidency and both houses of Congress would be devastating for Americans’ pocketbooks, given Democrat animus towards extending the TCJA tax cuts.
The Democrats’ strong opposition to TCJA was evident with the vote for its passage in Congress. Not a single Democrat in either the Senate or the House of Representatives voted for it. Moreover, both President Biden and Democrat presidential nominee Kamala Harris have expressed opposition to TCJA and extending its expiring tax cuts.
Harris Tax Proposals So Far Are Concerning
Harris’s position on the TCJA’s expiring tax cuts appears to be evolving as a new 2024 presidential candidate. Reportedly, she favors the extension of the Trump tax cuts for taxpayers earning less than $100,000 per year. However, she would let other significant tax relief under the TCJA expire. These include TCJA’s doubling of the standard deduction, significant scaling back of the alternative minimum tax, full expensing of short-life capital expenditures, and doubling the estate tax exemption among other tax changes.
In addition, Harris has advocated taxing capital gains and dividends at ordinary income tax rates and new financial transaction taxes with a 0.2 percent tax on stock trades and a 0.1 percent tax on bond trades. She also supports a new 4 percent tax on incomes above $100,000 to pay for the proposed “Medicare for All” program that has been pushed by Sen. Bernie Sanders (D-Vt.) and the radical socialist wing of the Democrat Party for the past several years.
A separate concern with Harris’s ideas on taxation extends to corporate income taxes. The TCJA cut the corporate tax rate from 35 percent to 21 percent without any expiration date; i.e. the current 21 percent corporate tax rate is permanent. However, Harris advocates increasing the corporate tax rate back to its previous 35 percent rate, thereby returning the United States corporate tax rate to one of the highest in the developed world.
Americans Lose in 2026 if Republicans Don’t Win in 2024
Whatever changes a prospective President Harris may propose, the Tax Foundation has estimated the impact on American taxpayers without any new tax legislation and the TCJA tax cuts expiring at year-end 2025. The following congressional district map developed by the Tax Foundation shows that income taxes will increase for taxpayers in every congressional district across the United States in 2026 if TCJA tax cuts expire as scheduled:
At the end of 2025, the individual tax provisions in the TCJA expire all at once. Without congressional action, most taxpayers will see a notable tax increase relative to current policy in 2026.
At the end of 2025, the individual tax provisions in the TCJA expire all at once. Without congressional action, most taxpayers will see a notable tax increase relative to current policy in 2026.
Explore the impact by congressional district: https://t.co/i7RRZgmntu pic.twitter.com/DkflSTmzrG
— Tax Foundation (@TaxFoundation) August 15, 2024
The tax increases from TCJA expiration would vary across the United States, primarily due to the TCJA state and local tax (SALT) deductions. The expiration of the SALT deductions will have the greatest impact on taxpayers in the higher state and local tax jurisdictions. Across all congressional districts, the average tax increase for each taxpayer is estimated by the Tax Foundation at about $2,853 compared to the current TCJA tax provisions.
The Tax Foundation further estimated the impact of converting TCJA into permanent law. In that case, TCJA permanence would create about 904,000 full-time equivalent jobs in 2026. The resulting increase in employment would otherwise not occur if the TCJA is allowed to expire as scheduled or is not made permanent.
The expiration of TCJA provisions would also impact overall economic growth. The Tax Foundation estimates that making TCJA tax provisions permanent and canceling TCJA-related scheduled tax hikes would raise long-term GDP by about 1.1 percent per year and increase wages by about 0.3 percent per year.
For the average American who wants to avoid significantly higher income taxes in 2026 and the prospect of greater economic prosperity in the years ahead, there’s a very clear choice in the upcoming elections on Nov. 5. The only rational choice is voting to achieve a sweeping Republican victory for the presidency, majority control of the Senate, and majority control of the House of Representatives. Anything less will guarantee sufficient Democrat power to not only obstruct and prevent extending the tax cuts and tax relief provisions of TCJA but also the possibility of new taxes on individuals and businesses and a higher corporate income tax rate.
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Steve Dewey is a retired federal financial regulator and managing director of the Bastiat Society of Washington, D.C. He is also the founder of GeoFinancial Trends, LLC, and writes on Substack.
Photo “Paperwork” by Tima Miroshnichenko.
