Keith Mack
The Trump Tax Cuts and Jobs Act (TCJA), also known as the Trump Tax Cuts, was passed in 2017 and resulted in significant changes to the US tax system. The Act included cuts to corporate and individual income tax rates, modifications to deductions and credits, and an increase in the child tax credit. While the corporate tax rate cut from 35% to 21% was made permanent, many other provisions of the TCJA were temporary and set to expire after 2025. With the impending expiration of these provisions, lawmakers and policymakers are faced with decisions on how to prioritize tax reform. The outcome will depend on the partisan control of Congress, with Republicans aiming to extend and expand tax cuts, while Democrats seek to reform tax breaks for lower- and middle-income households and raise taxes on the wealthy. The debate is expected to continue through 2025, with potential impacts on federal deficits, economic growth, and household incomes.
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What You'll Learn
The One Big Beautiful Bill Act
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. The Act notably includes permanence for major individual and corporate provisions of the Tax Cuts and Jobs Act (TCJA), along with additional temporary tax cuts.
The TCJA, passed by a majority-Republican Congress in 2017, was the largest tax code overhaul in nearly three decades. The law cut the corporate tax rate to 21%, capped deductions for state and local taxes (SALT) at $10,000, doubled standard deductions, and expanded the child tax credit. The goal of the one-and-a-half-trillion-dollar tax reform bill was to spur economic growth, reduce regulations, and create a more business-friendly environment in the US.
However, the TCJA was criticized for being skewed in favor of high-income households and corporations, failing to benefit low- and middle-income households. It also increased the federal debt and disproportionately increased after-tax incomes for the most affluent. As a result, there were calls for a course correction in the nation's revenue policies, with an emphasis on raising more revenue and supporting investments that benefit a broader range of Americans.
The OBBBA addresses some of these concerns by making the TCJA's tax cuts permanent and providing additional tax cuts and changes to the tax code. However, it is important to note that the OBBBA is projected to increase the federal deficit significantly, and there are concerns about its impact on American incomes.
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Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act (TCJA) is a United States federal law that amends the Internal Revenue Code of 1986. It is also known as the Trump Tax Cuts, but the law has no official short title. The TCJA was passed as reconciliation legislation, overriding typical filibuster rules and was passed by a Republican-led Senate with a simple majority of 51 votes. The Act cuts the corporate tax rate to 21% from 35%doubles standard deductions, and expands the child tax credit. It also allows a tax credit for employers that provide paid family and medical leave to employees.
The TCJA has been described as "the most sweeping tax overhaul in decades", simplifying the tax code for some and lowering corporate debt. It has also been criticized for increasing the federal debt and disproportionately raising after-tax incomes for the most affluent. The Penn Wharton Budget Model estimated that by 2027, debt would increase by between $1.9 trillion and $2.2 trillion, including macroeconomic feedback effects.
The TCJA was passed in 2017 and was signed into law by President Trump on December 22, 2017. The Act includes a variety of miscellaneous tax provisions, many of which advantage particular special interests. For example, it includes a tax break for citrus growers, allowing them to deduct the cost of replanting citrus plants lost or damaged due to causes like freezing, natural disasters, or diseases.
The TCJA's tax rates and deductions are set to expire amid growing federal deficit pressures. The partisan control of Congress will have a significant impact on whether the TCJA provisions will be renewed, reformed, or allowed to expire. Republicans aim to extend the TCJA and further expand some tax cuts, while Democrats are focused on reforming tax breaks for lower- and middle-income households and raising taxes on wealthier individuals and corporations.
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Trump Tax Cuts
On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) into law, making the 2017 Tax Cuts and Jobs Act (TCJA) permanent. The OBBB also introduced additional tax breaks, including deductions on tips and overtime pay, tax relief for seniors, and an expanded childcare tax credit.
The TCJA was passed in 2017 as a reconciliation bill by a Republican-led Senate with a simple majority of 51 votes. It was the largest tax code overhaul in nearly three decades, cutting the corporate tax rate from 35% to 21%capping deductions for state and local taxes (SALT) at $10,000, doubling standard deductions, and expanding the child tax credit. The goal of the $1.5 trillion tax reform bill was to boost economic growth, reduce regulations, and create a more business-friendly environment in the US.
While the corporate tax rate cut was made permanent, many other provisions of the TCJA were made temporary to keep costs down and comply with the Byrd Rule, which prohibits reconciliation bills from significantly increasing the federal deficit beyond a 10-year budget window or making changes to Social Security. As a result, the tax cuts were set to expire in 2025, leading to negotiations in Congress to address the expiring provisions.
The OBBB, passed by the House and Senate in July 2025, included permanence for major individual and corporate provisions of the TCJA, along with additional temporary tax cuts. It is estimated to increase budget deficits by $3.0 trillion from 2025 to 2034, with interest costs adding a further $725 billion over the same period.
The impact of the tax cuts varies across states and counties, with some areas benefiting more than others. According to the Tax Foundation, the average tax cut nationwide is expected to be about $3,752 per taxpayer in 2026, falling to $2,505 in 2030 as some tax breaks expire. However, a Congressional Budget Office report suggests that the legislation could benefit higher-income households while hurting lower-income Americans, with top earners gaining up to $13,600 per year, while the bottom percentile loses about $1,200 annually due to cuts in social programs.
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Partisan control of Congress
The future of Trump's tax laws is heavily dependent on the partisan control of Congress. The Tax Cuts and Jobs Act (TCJA), passed in 2017, was a significant overhaul of the tax code, reducing the corporate tax rate and cutting taxes for individuals. However, many of its provisions are set to expire, and the fate of these tax cuts rests with Congress.
If Republicans control Congress following the 2024 elections, they are expected to extend and possibly expand the TCJA tax cuts. They have argued that not passing the bill would result in a tax hike for Americans as the 2017 tax cuts are set to expire. Republicans aim to use the reconciliation process to push through tax cuts and changes to the tax code, as they did in 2017. This process allows them to bypass the Senate filibuster and pass legislation with a simple majority.
On the other hand, Democrats have opposed Trump's tax laws, criticizing them as benefiting the wealthy at the expense of middle- and lower-income households. They have vowed to reform tax breaks for lower- and middle-income earners and raise taxes on the wealthy and corporations if they gain control of Congress. Democrats are likely to focus on reversing the TCJA's impact, which they view as exacerbating inequality and favoring the ultra-rich.
The Congressional Budget Office (CBO) has estimated that the poorest 10% of Americans will lose about $1,200 per year due to Trump's tax laws, while the richest 10% will gain approximately $13,600. These estimates highlight the law's regressive nature, contributing to growing income inequality. The CBO's analysis further indicates that working families will experience a net loss in resources, while the ultra-rich will benefit disproportionately.
The partisan control of Congress will therefore play a pivotal role in shaping the future of tax policy. If Republicans maintain control, they will likely extend and expand Trump's tax cuts. Conversely, a Democratic-controlled Congress could bring significant reforms to the tax code, aiming to alleviate the burden on lower- and middle-income households and address the growing income inequality in the country.
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Trump Tariffs
In 2025, the Trump Administration is focused on addressing the expiration of several provisions of the Tax Cuts and Jobs Act (TCJA), which was passed in 2017. The TCJA was a significant overhaul of the US tax code, reducing corporate tax rates, capping deductions for state and local taxes, doubling standard deductions, and expanding the child tax credit. While some provisions of the TCJA are permanent, such as the corporate tax rate reduction, other provisions are temporary and set to expire.
President Trump has called for a permanent extension of the 2017 tax cuts and additional policies, such as eliminating taxes on tips, overtime pay, and Social Security benefits for retirees. To achieve these goals, the administration is utilising the budget reconciliation process, which allows for faster implementation of tax, spending, and debt limit changes. The One Big Beautiful Bill Act (OBBBA), signed into law by President Trump on July 4, 2025, is a key component of these efforts, making major individual and corporate tax cuts permanent and providing additional temporary tax cuts.
However, the Trump tariffs, imposed separately from the reconciliation process, have been criticised for potentially offsetting the economic benefits of the new tax cuts. These tariffs are estimated to increase taxes for the average US household by over $1,300 in 2025 and nearly $1,600 in 2026. The administration justifies the tariffs as a means to raise revenue and address trade imbalances, with a particular focus on protecting national security and the domestic manufacturing base.
In July and August 2025, the Trump administration announced potential tariffs on furniture imports, with a decision expected by October. These tariffs are intended to incentivise manufacturers to shift production back to the US, specifically targeting states with a history of furniture-making. The administration is also considering increased tariffs on a range of other imported goods, including copper, semiconductors, and pharmaceuticals. These actions align with President Trump's strategy to bolster domestic manufacturing and address global trade imbalances.
The impact of Trump's tariffs on the US economy and specific industries, such as the furniture market, remains to be seen. While some companies with domestic manufacturing may benefit, others heavily reliant on imports could face challenges and increased costs. The administration's ongoing negotiations with trade partners aim to reset the balance of global trade and address long-term issues.
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Frequently asked questions
The TCJA is the Tax Cuts and Jobs Act, a federal law that amended the Internal Revenue Code of 1986. It was also known as the Trump Tax Cuts.
The TCJA was passed in 2017 and signed into law by President Trump on December 22, 2017.
The TCJA cut the corporate tax rate from 35% to 21%capped deductions for state and local taxes (SALT) at $10,000, doubled standard deductions, and expanded the child tax credit.
The TCJA's individual income and estate tax provisions were set to expire at the end of 2025. However, in 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA), which made major individual and corporate provisions of the TCJA permanent.
The One Big Beautiful Bill Act is legislation that made the expiring tax cuts under the TCJA permanent, provided additional tax cuts, and made changes to the tax code. It was signed into law by President Trump on July 4, 2025.
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