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Congress Confronts Approaching Expiration of Several TCJA Provisions

Ruth Singleton
Published Date:
May 10, 2022

iStock-898172562 Tax Cuts and Jobs Act

As provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 approach their expiration dates, Congress has to make decisions about which ones to extend, the Washington Post reported. Congressional Republicans passed the TCJA, using familiar budget strategies, including setting many provisions to expire in a few years and scheduling some taxes to increase. Their expectation was that future members of Congress would extend the popular provisions and repeal the unpopular ones. 

Now, five years after the law’s passage, Congress has started dealing with some of the individual provisions. Recently, practically every Senate Democrat joined Senate Republicans in voting to restore a corporate research and development tax incentive that allows corporations to immediately deduct their research costs instead of spreading them out over five years. The provision was included in a bill aimed at keeping the U.S. economy competitive with China’s. 

Some of the more left-leaning Democrats had pushed from some concession from the Republicans, in exchange for this R&D provision, such as an extension of the Child Tax Credit or an increase in the corporate tax rate. According to the Post, the provision adds roughly $130 billion to the deficit, which is roughly half the cost of some versions of President Biden’s plans to cancel student debt. 

Democrats had planned to include an R&D tax incentive in Biden’s Build Back Better agenda, along with provisions that could bring in more tax revenue by, among other things, giving the IRS more funding to police tax evasion by the wealthy and implementing a minimum tax on large corporations. That would have been part of a broader rebalancing of the tax code after the TCJA, which Democrats have long argued is skewed to the benefit of large corporations. But the Build Back Better bill has not yet made it through the Senate, because of the opposition of two Democrats. 

A popular deduction on interest expenses is also set to decrease, and global tax rates on large corporations are set to increase in 2026. However, the TCJA made permanent the reduction in the tax rate from 35 percent to 21 percent for corporations generally, meaning that the least popular part of the bill would be the hardest to reverse because it has no expiration date. 

In addition, according to the Post, all of the rate cuts for households are set to expire in 2025. These include provisions that benefit middle-income taxpayers, such as the doubling of the standard deduction claimed by most taxpayers. Congressional Democrats know that if they vote against extending those measures, they risk giving Republicans  a strong issue to campaign on, the Post reported. But if they approve them, they will expand the federal budget deficit and make permanent a key part of President’s Trump’s legislative record. 

The Post quoted Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget, a Washington-based think tank, who said that extending all of the GOP tax cuts that are set to expire would add roughly $3 trillion to the deficit in the decade through 2035, on top of the existing $1.9 trillion cost of the tax law through 2026. And if Congress were to allow the $10,000 cap on state and local tax deductions to expire—as many Democrats want—that amount would jump to a $4 trillion increase in the federal deficit. 

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