As Republicans work on major fiscal policy legislation through reconciliation, indexing major tax breaks to inflation is gaining traction. The rising cost of living has eroded the value of certain tax breaks enacted in 2017, prompting calls for adjustments to reflect current economic realities.
As Republicans embark on crafting major fiscal policy legislation through reconciliation, a notable trend is emerging: indexing major tax breaks to inflation. Prices have surged by 21% over the past four years and nearly 28% since 2017, the year Republicans enacted the Tax Cuts and Jobs Act (TCJA), which they now aim to extend and amplify. This inflationary pressure has eroded the value of certain tax breaks , some by as much as a quarter since the TCJA's implementation.
While elements like the standard deduction and individual income tax brackets are indexed to inflation, key provisions like the child tax credit and the cap on state and local tax (SALT) deductions remain unadjusted. The child tax credit, established at $2,000 by the TCJA, has lost purchasing power due to inflation. Similarly, the $10,000 cap on SALT deductions has become less impactful in real terms.Rep. Nicole Malliotakis (R-NY), a vocal advocate for indexing the SALT cap, has repeatedly emphasized this point, even discussing it during a Mar-a-Lago meeting with President Donald Trump and a group of Republicans. She stated that both Ways and Means Committee Chairman Rep. Jason Smith (R-MO) and President Trump are receptive to the idea. Rep. Max Miller (R-OH) suggests that Republicans might consider adjusting the child tax credit to inflation, at least once, to reflect its diminishing value. Senator Josh Hawley (R-MO) also voiced his support for tying the credit to inflation, citing the impact of inflation on family incomes.Rep. Blake Moore (R-UT) introduced the Family First Act, a bill that proposes increasing the child tax credit to $4,200 for families with children under 5 and $3,000 for families with children aged 6 to 17. It also includes a $2,800 tax credit for pregnant mothers. While the reconciliation process is in its early stages, inflation's significant impact on the economy is likely to heavily influence Republicans' decisions as they work to extend and expand upon the 2017 Trump tax cuts.
REPUBLICANS TAX BREAKS INFLATION RECONCILIATION TRUMP TAX CUTS CHILD TAX CREDIT SALT FAMILY FIRST ACT
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