The Congressional Budget Office updated its estimate for extending the expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA) to $4.6 trillion over 10 years. The new figure, released on May 8, represents a significant increase over the $3.5 trillion estimate the nonpartisan budgetary scorekeeper released last year, and further complicates the outlook for addressing the fiscal cliff coming in 2025.
The estimate was provided as part CBO’s assessment of alternative budget baselines under various policy scenarios, and it assumes the retention and extension of all current-law TCJA provisions set to expire or change in 2025, including the individual tax cuts, limits on itemized deductions, the Section 199A deduction for pass-through businesses, and the current rates for the tax on global intangible low-taxed income (GILTI), the base erosion and anti-abuse tax (BEAT), and the deduction for foreign-derived intangible income (FDII). It also includes the extension of several tax credits that also expire in 2025, such as the Work Opportunity Tax Credit and New Markets Tax Credit, but it does not amortization of research costs under Section 174, or the limit on interest deductions under Section 163(j).
The sheer volume of built-in changes to the tax code next year is widely expected to act as a potential trigger for major tax reform, and the fate or legislation addressing the 2025 “fiscal cliff” could hinge on the 2024 election.
House Ways and Means Committee Chair Jason Smith, R-Mo., has openly discussed how his members are interested to use the opportunity to revisit tax policy more broadly, putting even corporate rates on the table.
“There are people on both sides of the aisle that believe that the corporate tax rate is not enough,” Smith said recently. “Whether you’re doing it through reconciliation or in a bipartisan approach, if you think the C corp[oration] is not on the table for discussion, every tax provision is on the table. Nothing is permanent.”
Cost could become an important consideration. “Without a doubt one of the biggest challenges that will be discussed, debated, and decided in 2025 is, should taxes be paid for or should they not be paid for,” Smith added.
Ways and Means Republicans created working groups to prepare for next year, and on May 21 opened a portal for public comment.
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