Cecily Zamora
Former US President Donald Trump's tax law, the Tax Cuts and Jobs Act (TCJA), was signed into law in 2018. The law was a major overhaul of the tax code, impacting taxpayers and business owners, particularly through tax cuts. While the law provided tax benefits for individuals and families, many of these benefits are set to expire in 2025. The law has been criticized for benefiting high-income households and corporations while eroding the US revenue base and failing to deliver promised economic benefits. With the expiration of these tax cuts approaching, there is expected to be a political battle over taxes and potential course correction in the nation's revenue policies.
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What You'll Learn
Trump's tax cuts will expire in 2025
The Tax Cuts and Jobs Act (TCJA) was signed into law by President Donald Trump in 2018. The Act was a major overhaul of the tax code, impacting both taxpayers and business owners, particularly through tax cuts. However, many of the tax benefits for individuals and families that were introduced by the Act are set to expire in 2025.
The TCJA's individual tax cuts, such as lower brackets, a bigger standard deduction, and expanded credits, were temporary measures due to end after 2025 unless Congress intervenes. The Act's corporate tax cuts, however, were permanent. The corporate tax rate was lowered from 35% to 21%, resulting in a significant loss of revenue for the government.
The nonpartisan Congressional Budget Office (CBO) reported that Trump's tax law would primarily benefit the rich while negatively impacting poorer Americans. The CBO estimated that the poorest 10% of Americans would lose approximately $1,200 per year due to restrictions on government programs like Medicaid, while the richest 10% would gain around $13,600 from the tax cuts. The law has been criticized for exacerbating income inequality and eroding the US revenue base.
The impending expiration of Trump's tax cuts in 2025 presents an opportunity for policymakers to address the shortcomings of the 2017 law and make the tax code fairer and more equitable. Progressive groups have advocated for raising taxes on the wealthy and profitable corporations to generate more revenue, which could be used to finance investments in people and communities.
While the fate of Trump's tax cuts beyond 2025 remains uncertain, the political battle over taxes is expected to be intense, with Republicans likely to push for an extension or expansion of the cuts, while progressives seek to make the tax code more just.
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The tax cuts mostly benefit the rich
The Tax Cuts and Jobs Act (TCJA), signed into law by President Trump in 2018, has been criticised for disproportionately benefiting the wealthy. While the legislation does provide tax cuts for all American households, including middle-income families, the largest advantages accrue to the top 10% of earners. This has led to claims that the law primarily benefits the rich while adversely affecting lower-income Americans.
The nonpartisan Congressional Budget Office (CBO) estimates that the poorest 10% of Americans will lose approximately $1,200 annually due to restrictions on government programmes like Medicaid and food assistance. In contrast, the richest 10% are expected to gain $13,600 from the tax cuts. These figures highlight the regressive nature of the policy, where the relative tax burden falls more heavily on those with lower incomes.
The CBO's findings are supported by other analyses. For example, the Institute on Taxation and Economic Policy indicated that the Act disproportionately impacts upper-middle-class families in metropolitan areas, particularly in Democratic-leaning states. Additionally, the Penn Wharton Budget Model projected that the legislation would increase debt by $1.9 trillion to $2.2 trillion by 2027.
The TCJA's defence has been led by Republicans, who argue that the tax cuts will stimulate economic growth. President Trump himself referred to it as "one big beautiful bill", emphasising its benefits for hardworking families and the economy. However, these assertions have been contested. Research has failed to find conclusive evidence that the rate cut substantially boosted wages for most workers or spurred significant investment. Instead, it has been noted that corporations used a relatively small portion of their tax savings to pay worker bonuses.
The TCJA's impact on the federal deficit has also been a concern. The legislation added $1.5 trillion to the deficit, requiring separate legislation to waive automatic spending cuts that would have affected programmes like Medicare. The law's erosion of the country's revenue base has limited policymakers' ability to address critical issues such as climate change, housing, childcare, and investments in children and workers.
In conclusion, while the TCJA provided tax cuts across the board, the magnitude of the benefits skewed towards the highest earners. This has contributed to growing income inequality and exacerbated existing social and economic challenges in the United States.
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The tax cuts will result in less income for the poorest Americans
The Tax Cuts and Jobs Act (TCJA) was signed into law by President Trump in 2018. It was a major tax code overhaul that cut taxes for shareholders and individual taxpayers. However, critics argue that the tax cuts have resulted in less income for the poorest Americans while benefiting the rich.
The nonpartisan Congressional Budget Office (CBO) reported that the poorest 10% of Americans will lose about $1,200 a year due to restrictions on government programs like Medicaid and food assistance. Meanwhile, the richest 10% will gain around $13,600 from the tax cuts. The CBO's findings contradict President Trump's promise that the tax cuts would benefit American workers and increase wages. Instead, hiring has slowed, and wage growth has been lackluster.
The tax cuts have also contributed to a significant decline in corporate tax receipts, with a $430 billion shortfall in tax revenues for 2018 and 2019 compared to predictions. The corporate tax rate cuts have resulted in far fewer tax dollars flowing to the Treasury Department, impacting government spending on vital programs that support low-income households.
Furthermore, the TCJA has been criticized for its disproportionate impact on families with low and moderate incomes. While it nearly doubled the standard deduction for married couples, it also eliminated personal exemptions and made adjustments for inflation, resulting in higher taxes for some families. The law also doubled the estate tax exemption, allowing the wealthiest households to pass on up to $22 million tax-free to their heirs.
The extension of the TCJA beyond 2025, when many of the individual tax cuts are set to expire, would further widen the income gap. Analysts predict that extending the expiring provisions would provide a $48,000 tax cut for households in the top 1% but only about $500 for those in the bottom 60% of households. Therefore, it is clear that the Trump tax cuts have disproportionately benefited the rich while resulting in reduced income and government support for the poorest Americans.
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The tax cuts will cause a loss of health insurance for millions
The Tax Cuts and Jobs Act (TCJA), signed into law by President Trump in 2018, is expected to result in millions of Americans losing their health insurance. The Act, which cut taxes for both shareholders and individual taxpayers, is projected to cause a loss of health coverage for 10.9 million people, primarily due to changes to Medicaid. This is in addition to the impact on federal health spending, with cuts of about $1 trillion over a decade, jeopardizing the health of tens of millions of Americans.
The Congressional Budget Office (CBO) estimates that nearly 12 million people will be without insurance by 2034 due to reductions in federal support for Medicaid and Affordable Care Act (ACA) marketplaces. The TCJA ended the individual mandate, a key provision of the ACA that required individuals to purchase health insurance or pay a penalty. This change, along with cuts to Medicaid, will leave millions without coverage.
The impact of the tax cuts on health insurance loss is twofold. Firstly, the TCJA directly removed the individual mandate, which may discourage people from maintaining health insurance coverage. Secondly, the tax cuts have contributed to significant federal budget deficits, which could trigger automatic cuts to Medicare and other federal programs if Congress does not intervene. These potential cuts to Medicare, estimated at $491 billion from 2027 to 2034, further threaten the accessibility of healthcare for millions.
In addition to the direct impact on health insurance coverage, the tax cuts have also affected the affordability of healthcare for low-income individuals. Hospitals, particularly in rural areas, are already facing challenges due to cuts to Medicaid. The GOP plan's curtailment of provider taxes has resulted in reduced Medicaid payments to hospitals, nursing homes, and other providers. This has especially impacted rural communities, where healthcare services, medical professionals, and hospitals are already scarce.
The loss of health insurance for millions is a significant consequence of the Trump tax law, and it underscores the trade-off between tax cuts and the accessibility of healthcare. While the tax cuts may have provided economic benefits, they have also contributed to a decline in health coverage for vulnerable populations, potentially exacerbating existing healthcare disparities in the country.
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The tax cuts will reduce federal revenue
The Tax Cuts and Jobs Act (TCJA) was a major tax code overhaul signed into law in 2018 by President Trump. The Act cut taxes for shareholders and individual taxpayers, with the individual tax cuts set to expire in 2025. However, in July 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, which made many of the individual tax cuts and reforms of the TCJA permanent.
The OBBBA is expected to increase long-run GDP by 1.2% and wages by 0.4%. However, it is also projected to reduce federal tax revenue by $5 trillion over the next decade on a conventional basis. Dynamic feedback is expected to reduce the revenue loss by about 19% to $4.1 trillion.
While President Trump has argued that lowering the corporate tax rate to 21% in 2018 led to increased revenues due to economic growth, economists disagree. They argue that while the tax cut did stimulate some growth, it did not make up for the loss in tax revenue. For example, corporate tax receipts for the fiscal year ending in September 2018 were down 31% from the previous year, attributed to the tax cut by analysts.
The Congressional Budget Office (CBO) estimates that the poorest 10% of Americans will lose about $1,200 per year due to restrictions on government programs like Medicaid, while the richest 10% will gain $13,600 from tax cuts. Overall, American households will see more income from the tax cuts, but the largest benefits will go to the top 10% of earners. This has led to criticism of the legislation, with some arguing that it primarily benefits the rich while leaving poorer Americans with less.
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Frequently asked questions
Trump's tax cuts are set to expire at the end of 2025.
Trump's tax law, also known as the Tax Cuts and Jobs Act (TCJA), was a major overhaul of the tax code that reduced taxes for both corporations and individuals. While it was claimed that the law would benefit all taxpayers, analysis suggests that it primarily benefited high-income households and corporations, while eroding the US revenue base.
With the tax cuts set to expire, there is expected to be an epic political battle over taxes. President Trump has called for a permanent extension of the tax cuts, while progressives aim to make the tax code fairer and more equitable. Lawmakers will need to decide whether to extend the tax cuts, allowing them to continue benefiting high-income households, or let them expire and implement a new tax package.
The key provisions of Trump's tax law that are set to expire include the individual income and estate tax provisions, as well as the ""pass-through" deduction, which allowed non-corporate businesses to exempt a significant portion of their profits from taxes. The expiration of these provisions will impact high-income households the most, as they were the primary beneficiaries of the law.
