Deficit Impact of Extending Tax Cuts and Jobs Act Provisions Policy (First Year Policy Expires/Changes) These costs are partially offset by extending revenue-raising provisions like the repeal of personal exemptions ($1.4 trillion saved), the $10,000 cap on the State and Local Tax (SALT) deduction and other deduction changes ($765 billion), and the cap on pass-through business loss deductions ($154 billion).
The largest extension costs include the reductions in individual income tax rates ($1.5 trillion), the increase in the standard deduction ($887 billion), the scaling back of the Alternative Minimum Tax (AMT) ($884 billion), the expansion of the Child Tax Credit (CTC) ($514 billion), and the 20 percent deduction for pass-through business income ($459 billion). In an effort to mask its true cost and fit within cost limits, almost all of the individual and estate tax provisions are set to expire after 2025, while several business tax provisions are set to either expire, go into effect, or become less generous at various points.Įxtending the individual and estate tax provisions permanently would cost $2.2 trillion through FY 2032 and $362 billion in 2032 alone. The TCJA made significant changes to the federal tax code, including lowering corporate and individual income tax rates, increasing the standard deduction, reforming child tax benefits, and reforming the corporate international tax system, amongst other provisions. These costs would increase debt as a share of Gross Domestic Product (GDP) in Fiscal Year (FY) 2032 to 116 to 118 percent of GDP, compared to 110 percent of GDP under current law. CBO estimates that extending the individual income and estate tax provisions that are set to expire after 2025 would cost $2.2 trillion through 2032 also extending business tax provisions that are set to expire or become less generous would increase the cost to $2.7 trillion. The most notable one is the cost of extending most temporary provisions in the Tax Cuts and Jobs Act (TCJA) of 2017, which CBO hadn't officially estimated since 2019. The Congressional Budget Office's (CBO) latest baseline spells out what the federal budget will look like under current law, but also estimates the cost of several policy alternatives.
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