Daniel Bunn President and CEO at Tax Foundation | Twitter Website
In a recent development concerning the future of tax policy in the United States, President Trump has advocated for making the 2017 Tax Cuts and Jobs Act (TCJA) permanent. The proposal includes eliminating taxes on tips, overtime pay, and Social Security benefits for retirees. Additionally, Trump aims to introduce a deduction for auto loan interest on American-made cars and increase tariffs on US imports.
The Tax Foundation has analyzed these proposals, indicating that extending the TCJA would reduce federal tax revenue by $4.5 trillion from 2025 through 2034. Despite this reduction, long-run GDP is projected to be 1.1 percent higher, offsetting some of the revenue losses by approximately $710 billion or 16 percent.
President Trump's tax strategy also involves using budget reconciliation—a legislative process that bypasses Senate filibuster—to implement new tax cuts. On February 25, 2025, the House passed a budget resolution initiating this process with plans to cut taxes and spending over the next decade relative to current law baselines. Meanwhile, the Senate's resolution does not permit any tax cuts.
Critics highlight potential drawbacks of Trump's reliance on import tariffs to balance tax cuts costs. "Tariffs are a particularly distortive way to raise revenue," analysts note, pointing out they could provoke foreign retaliation.
The Tax Foundation estimates that without congressional action by January 1, 2026—when most provisions of the TCJA will expire—62 percent of taxpayers could face increased taxes.
Trump’s campaign estimates his proposed tax changes would boost long-run GDP by 0.8 percent and create nearly 600,000 full-time equivalent jobs but increase the ten-year budget deficit by $3 trillion conventionally.
As Congress considers these proposals amidst looming TCJA expirations at the end of 2025, experts like Erica York from the Tax Foundation emphasize principled reform as essential for economic growth and fiscal responsibility.
