The Congressional Budget Office (CBO) projected in a new report that the extension of tax cuts passed as part of former President Trump’s signature 2017 tax law could add trillions of dollars to the nation’s deficits over roughly the next decade.
Citing numbers from the Joint Committee on Taxation, the CBO said Wednesday that the extension of the act’s expiring income tax provisions could add a net $3.3 trillion to the nation’s primary deficits over the 2025-2034 period.
“Most of the effects would occur after 2026,” the CBO said, while noting projections that “increased net outlays for interest would add $467 billion to those deficits.”
Next year, a chunk of individual income tax provisions in the act are set to expire, the CBO noted, adding that those provisions would “affect major elements of the individual income tax code.”
That includes statutory tax rates and brackets, allowable deductions, “size and refundability of the child tax credit, the 20 percent deduction for certain business income, and the income levels at which the alternative minimum tax takes effect,” the agency said.
The CBO has also projected hundreds of billions of dollars in added costs for the possible extension of the act’s higher estate and gift tax exemptions, as well as other parts of the law.
Democrats have been quick to seize on the projections.
“The Trump tax cuts were a gift to the ultrarich and a rotten deal for American families and small businesses,” Senate Budget Committee Chair Sheldon Whitehouse (D-R.I.) said in a statement Wednesday.
“With their impending expiration, we have a chance to undo the damage, fix our corrupted tax code, and have big corporations and the ultra-wealthy begin to pay their fair share.”
However, GOP lawmakers, who have sought to make tax cuts in the 2017 tax law permanent, have pushed back on Democratic criticism of the act, defending the tax measure as pro-growth while taking aim at CBO’s scoring of the cuts.
“The truth is, the Trump tax cuts resulted in economic growth that was a full percentage point above CBO’s forecast, and federal revenues far outpaced the agency’s predictions,” Ways and Means Committee Chairman Jason Smith (R-Mo.) and House Budget Committee Chairman Jodey Arrington (R-Texas) argued in a statement Thursday.
“In fact, under Trump tax policies in 2022, tax revenues reached a record high of nearly $5 trillion, and revenues averaged $205 billion above CBO predictions for the four years following implementation of the law,” they added.
The expiration date for the cuts also comes as Congress stares down another potentially nasty fight next year over the debt limit, which caps how much money the Treasury can borrow to pay the country’s bills.
Congress voted last year to suspend the debt ceiling through 2024 — when the nation’s debt stood at $31.4 trillion. It now stands at more than $34 trillion.