The scheduled expiration of the 2017 Tax Cuts and Jobs Act at the end of 2025 is causing economists to warn of a potential fiscal cliff. If no action is taken by Congress or the president, tax increases will automatically be imposed on millions of Americans, including higher tax rates, reduced standard deductions, and decreased child tax credits.
, an event economists are describing as a “ fiscal cliff .” If Congress does nothing or the president stymies congressional action, the law will automatically impose tax increases on millions of Americans. Tax rates will rise, the standard deduction will fall, and child tax credits will shrivel.
The Trump tax cut law sunsetted most of the individual tax cuts for the usual budget shenanigan reasons. The way the official government calculations work, if a spending or tax cut provision expires in a few years, it has a smaller impact on the long-term budget estimates.
. The Budget Lab estimates growth accelerating from a 1.8 percent pace at the end of 2025 to reach a 2.15 percent annual rate in the third quarter of 2026 if all the tax cuts are extended. The partial extension sees growth accelerating to 2.09 percent. Under the no-extension baseline scenario, the economy grows at a 1.92 percent pace in the third quarter of 2026.to 1.65 percent by the fourth quarter of 2026. That seems like a budget disaster. But don’t worry, the Budget Lab assures us.
. The model then assumes that the decrease in the deficit results in lower interest rates. Those lower interest rates result in more business investment. The increase in business investment is seen as boosting growth.
2017 Tax Cuts And Jobs Act Fiscal Cliff Tax Increases Tax Rates Standard Deduction Child Tax Credits
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