As the 119th Congress convenes on January 14, 2025, discussions surrounding the Tax Cuts and Jobs Act (TCJA) of 2017 are intensifying, particularly regarding its expiring provisions. A recent study by the National Association of Manufacturers (NAM), conducted by Ernst & Young, warns that failing to extend the TCJA could lead to a staggering $1.089 trillion hit to the U.S. economy, resulting in the loss of nearly six million jobs and $540 billion in wages [cf04f629]. The manufacturing sector alone could see a loss of 1.137 million jobs and $126 billion in compensation, which would reduce manufacturing GDP by $284 billion [cf04f629].
However, U.S. Treasury Secretary Janet Yellen has raised significant concerns about the implications of extending these tax cuts. On January 15, 2025, she warned that doing so could lead to unsustainable deficits, potentially adding around $4 trillion to the national debt through 2034. Yellen emphasized the need for fiscal sustainability in tax and spending priorities, cautioning that such policies could undermine the country's economic strength and provoke a future debt crisis [2e8941cf].
The Congressional Budget Office (CBO) recently projected a budget deficit of $1.865 trillion for fiscal 2025, unchanged from the previous year, under the assumption that Trump's tax cuts will expire at the end of 2025. The CBO estimates that extending these tax cuts could add over $4 trillion to deficits over the next decade, with cumulative deficits from 2026 to 2035 estimated at $21.758 trillion [411b70b9]. CBO Director Phillip Swagel noted that higher revenue projections are due to an upward revision of the U.S. economy's size, projecting economic growth at 1.9% for 2025 [411b70b9].
The Joint Committee on Taxation (JCT) and the CBO have provided differing analyses on the potential economic impacts of extending these tax cuts. According to a recent analysis by Louise Sheiner from the Brookings Institution, the JCT predicts a 0.5% increase in GDP from 2025 to 2034 if the tax cuts are extended, while the CBO estimates a more modest 0.1% increase [df00b771].
The implications of these differing projections are significant. The JCT forecasts a net revenue loss of $3 trillion due to the extensions, whereas the CBO emphasizes the crowding-out effects that could arise from increased deficits, suggesting that higher deficits could lead to reduced investment in the economy [df00b771]. This divergence in modeling raises questions about the long-term sustainability of the tax cuts and their impact on economic growth.
In light of these discussions, Shayna Strom from Equitable Growth highlights that the TCJA added $2 trillion to the national debt and primarily benefited high-income executives and shareholders. Research indicates that nearly all $1.3 trillion in C-corporation tax cuts favored the wealthy [24d661a1]. This raises concerns about economic inequality, which, according to economist Alan Krueger, reduced aggregate consumption by $440 billion annually from 1979 to 2007 [24d661a1].
As discussions continue, NAM's CEO Jay Timmons emphasizes the urgency for Congress to act, highlighting the potential job losses and economic downturn if the tax cuts are not extended [cf04f629]. Congressional leaders, including House Speaker Mike Johnson and House Majority Leader Steve Scalise, have expressed their support for extending the tax cuts, advocating for immediate action to prevent economic decline [cf04f629]. A press conference is scheduled for Tuesday at the Capitol to discuss the implications of inaction [cf04f629].
Thomas Sanco from the Tahlequah Daily Press adds that Trump must act decisively to preserve the tax cuts to fulfill his campaign promises and address ongoing economic concerns, particularly amid rising inflation [29db8086]. Adam Michel from the Cato Institute warns that failure to act could result in a staggering $400 billion annual tax increase for American families, as over 98% of Americans benefited from the tax reforms [cad57bc7].
Critics argue that the tax cuts disproportionately benefit the wealthy and contribute to the national deficit, but Sanco counters that U.S. revenue reached a record high of $4.92 trillion in 2024, suggesting that the issue lies more with government spending than with revenue generation [29db8086]. Meanwhile, Grover Norquist warns that failure to make the tax cuts permanent could lead to significant job losses, with estimates suggesting nearly 6 million American jobs could be at risk [fa82ed6b].
As the clock ticks down to the expiration of these tax cuts, the pressure mounts on Trump and Congress to take decisive action to secure the economic future of the nation [29db8086].