Tax Cuts on the Horizon: GOP’s $4 Trillion Agenda Under Trump Administration
As the Republican Party gears up for a new chapter with President-elect Donald Trump in the White House, their primary focus remains on the ambitious plan to renew approximately $4 trillion in expiring tax cuts. This initiative is prominently featured in their 100-day agenda. On Friday, the U.S. Treasury unveiled an analysis detailing how extending certain provisions of Trump’s 2017 tax overhaul, known as the Tax Cuts and Jobs Act (TCJA), could impact government revenues and identify who stands to benefit most from these tax changes.
The Treasury’s Office of Tax Analysis projects that the wealthiest 0.1% of earners would see an average tax reduction of $314,000 if all individual and estate tax provisions were permanently extended. Notably, the cumulative cost of these tax cuts is estimated to reach $4.2 trillion over the period from 2026 to 2035. In contrast, if the tax cuts were limited to households earning $400,000 or less annually—a commitment made by President Joe Biden and Vice President Kamala Harris during their 2024 election campaign—the overall cost would be significantly lower, at around $1.8 trillion. This figure is less than half the total cost associated with extending the full suite of tax cuts. A Treasury official emphasized that the purpose of this analysis is to provide Congress with options in light of the challenging choices they face, particularly regarding funding these tax cuts while managing a federal debt that exceeds $36 trillion.
The TCJA stands as a landmark achievement of Trump’s first term, representing the most extensive tax reform in a generation. Its potential impact is expected to play a crucial role in shaping Trump’s campaign for a second term in office. Trump advocates for the renewal of all expiring provisions, while Republicans are also committed to reducing federal spending.
Balancing these tax extension proposals with fiscal responsibility poses significant challenges for upcoming congressional negotiations. In addition to his call for extending tax cuts, Trump is proposing measures designed to benefit working- and middle-class Americans, including exempting earned tips, Social Security wages, and overtime wages from income tax. Lawmakers are also contemplating a temporary increase in the $10,000 cap on state and local tax deductions for most married couples.
The Committee for a Responsible Federal Budget has estimated that such a measure could result in a revenue reduction of approximately $170 billion. Republicans are expected to seek the reversal of energy tax credits included in Biden’s Inflation Reduction Act, along with eliminating income tax increases aimed at high-income earners. Most individual tax code changes enacted under the TCJA are set to expire by the end of 2025, which adds urgency to the current discussions.
A recent report from the Urban-Brookings Tax Policy Center highlighted that households earning around $450,000 and above would capture over 45% of the benefits from extending key provisions of the 2017 tax reform. Meanwhile, forecasts from the Penn Wharton Budget Model indicate that making the TCJA provisions permanent could add $4 trillion to deficits over the next decade. Republicans argue that tax cuts lead to economic growth by fostering increased economic activity through lower taxes.
Neil Bradley and Watson McLeish from the U.S. Chamber of Commerce underscored this perspective in an August report, noting that many TCJA provisions were intentionally designed to promote economic expansion.
