Republicans Consider Options to Fund Continued Trump Tax Reductions

Republican lawmakers are discussing the extension of former President Donald Trump’s tax cuts beyond 2025, with a projected cost of around $4 trillion. However, there is still uncertainty about how this cost will be covered, if at all.

No final decisions have been made, as they are likely to come after the fall elections determine the makeup of the House, Senate, and White House. The internal discussions within the party have already begun, as reported by The Wall Street Journal.

While many argue that the extensions will spur economic growth and may not require full funding, others are exploring options to reduce the net cost through cuts in federal spending or repealing other tax breaks, such as those for electric vehicles.

The Congressional Joint Committee on Taxation estimates that extending individual and estate tax cuts, along with business tax changes, will lead to a $4 trillion reduction in national revenue. This comes amid projections of $20 trillion in new deficits.

The current tax law was enacted in 2017, when the budget deficit was at 3.4% of the GDP. Since then, increased spending, tax cuts, and interest costs have driven up deficits, with GDP often exceeding 5%.

While Trump has expressed his desire to extend the 2017 tax cuts, he has not outlined a plan to fund them. President Joe Biden, on the other hand, proposes offsetting extensions by raising taxes on high-income households and corporations.

Rep. Blake Moore of Utah acknowledges the need to pay for any tax cuts responsibly, emphasizing the importance of balancing the need for economic growth with fiscal responsibility.

If action is not taken by the end of 2025, the standard deduction and child tax credit will decrease, while marginal income tax rates will rise, leading to tax increases for over 60% of households, with only 9% receiving a tax cut.

In 2017, House Republicans initially aimed to restructure tax laws without cutting federal revenues, but eventually shifted to net tax cuts totaling $1.5 trillion, which included repealing a domestic manufacturing tax break for corporations.

Rep. Jason Smith, who chairs the House Ways and Means Committee, has indicated that some Republicans are open to raising the 21% corporate tax rate.

Democrats express skepticism about the Republicans’ deficit claims and their willingness to extend tax cuts without a clear funding source, criticizing them for creating excuses and then complaining about debt and deficits.