What would happen if the Trump tax cuts expired

Congress faces a major “tax cliff” in 2025 with the expiration of the individual components of the 2017 Tax Cuts and Jobs Act, otherwise known as the Trump tax cuts. This year’s elections will largely determine the fate of trillions of dollars in tax cuts and the course of policy for years to come. At stake are individual tax rates, the doubled standard deduction, the enlarged child tax credit, the new tax break for businesses that file as individuals, and the increased exemptions for the estate tax. The Washington Examiner is featuring a series on key considerations for this tax battle. Read Part 1 and Part 2 .

Key provisions of the Tax Cuts and Jobs Act of 2017 , also known as the "Trump tax cuts," are set to expire at the end of 2025, raising the prospect of major tax hikes and a hit to commerce if Congress does not act.

With the future of the lapsing provisions set to be dictated by whichever combination of Democrats and Republicans win control of the two chambers of Congress and the White House in November, here is what to expect if the provisions indeed sunset and what proposals have been floated to keep or replace the TCJA.

What is expiring at the end of 2025?

The 2017 tax cut permanently overhauled the corporate tax code, including by decreasing the corporate tax rate from 35% to 21%. All the individual provisions, though, will expire, including the lowered tax rates.

Other provisions that will lapse include the doubled child tax credit of $2,000, the doubled standard deduction, the enlarged exemptions for the estate tax, and the elimination of the alternative minimum tax. A new special tax break for businesses that file through the individual side of the code is also set to lapse.

Also set to expire are measures that raised revenues to offset the tax cuts. That includes, most notably, the $10,000 limitation on deductions for state and local taxes paid, or SALT. Lawmakers from high-tax states have been trying for years to lift the SALT cap.

What would expiration mean for taxpayers?

If no action is taken on the sunsetting provisions of the TCJA, a majority of taxpayers will see net tax hikes, according to an analysis by the Tax Foundation.

The size of the tax increase would depend on the taxpayer's circumstances.

For example, a single filer with no dependents making $75,000 a year would pay $1,707.75 more annually in taxes, or suffer a 2.73% hit to take-home income.

Married filers with two children making $165,000 annually would pay $2,450.50 more in taxes each year, or 1.73% less income taken home.

The impact would be seen when taxpayers file their 2026 taxes in early 2027, giving some additional time for lawmakers to adjust tax law once the provisions expire.

Overall, the Tax Foundation found that extending the tax cuts would boost the after-tax incomes of groups all across the income spectrum. For those in the middle quintile, it would amount to a 1.9% increase in 2026. For the top 1%, it would be 4.8%.

While the SALT cap will expire, possibly offering some relief to taxpayers, Garrett Watson, a senior policy analyst and modeling manager at the Tax Foundation, told the Washington Examiner that the other lapsing provisions, mainly the tax rates themselves and the higher exemption amounts for the alternative minimum tax, would largely nullify the benefits of the SALT deduction cap going away.

"So, long story short, we run all this out," Watson said. "Most taxpayers, the vast majority of these folks, end up ahead with the current law than in a prior law world, in which the SALT cap was not there, and that would be true moving forward as well for all those reasons."

What other effects would the lapsing provisions have?

The increase in income taxes would disincentivize people to work, save for the future, and invest in the economy, according to the Tax Foundation, hurting economic growth. Over time, according to the group's model, extending the tax cuts would raise gross domestic product by 1.1% and create more than 900,000 jobs.

Extending the tax cuts, though, would also reduce the revenue taken in by the federal government and add to its budget deficits.

In total, it would cost $3.5 trillion over the 10-year budget window and add 25.5 percentage points to the federal debt as a share of the economy. Those figures, though, do not take into account the revenues that would be generated by the additional economic growth spurred by the lower tax rates. Including that "dynamic effect," the Tax Foundation found that only 19 percentage points would be added to the debt-to-GDP ratio.

Another model, the Penn Wharton Budget Model, found that if the expiring provisions were extended, the debt would increase and the gross domestic product would only experience a "modest increase in GDP by 2054, equal to 0.2 percent." It also found that there would be modest gains in "capital stock and hours worked."

What are proposals to keep parts of the tax cuts?

The future of the Trump tax cuts will hinge on the partisan makeup of Congress and the White House next year. The races for both chambers and the presidency are widely considered to be toss-ups.

Republicans have pledged to push to make the expiring provisions permanent.

Former President Donald Trump has also called for eliminating taxes on Social Security benefits and on tips for restaurant and hospitality workers.

Vice President Kamala Harris has called for keeping the tax cuts for those earning $400,000 annually, which Watson said would generate $2.3 trillion in additional revenue.

Another idea floated to generate revenue to help offset some proposed tax changes would be raising the corporate tax rate from 21% to 28%. President Joe Biden included the proposal in his fiscal 2025 budget.

Under a split control of Washington between the chambers of Congress and the White House, the path forward is less clear, but there could be considerations to either temporarily extend the sunsetting provisions or deal with it later.

"If there is gridlock or they just can't get them across the finish line next year, I think there is a big temptation to do a couple of options," Watson told the Washington Examiner.

He explained that because the provisions do not expire until the end of 2025, people will not have to deal with the changes until 2026, and most will not see them until they file their 2026 taxes in early 2027.

"So there may be a temptation to push this into '26," Watson said. "The other option is actually just keep the status quo, but temporarily extended by a year or two, and push this whole debate out if you can for another year or two."

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"There actually is a protocol precedent for that," Watson added, pointing to the temporary extension made to the Bush tax cuts in the early 2010s.

Regardless of what happens with control of Congress and the White House, Watson said he believes one thing to watch is what happens to the SALT tax deduction cap. Ending it or enlarging it would require finding a new source of revenue.