The expiration of provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) at the end of 2025 presents an opportunity for Congress to foster continued economic growth and protect working families from higher taxes. 

If lawmakers fail to extend these provisions, 62 percent of filers would see a tax increase. A failure to extend the TCJA’s provisions would reverse tax cuts for small businesses. It would also lead to a more complex tax code for American families.

Permanently extending these provisions should be a priority for lawmakers. 

The TCJA was a landmark piece of tax reform policy. It lowered rates and broadened the tax base. This resulted in a more efficient and equitable tax code. In simplifying the tax code for individual filers, the TCJA made it easier for working families to navigate their taxes while reducing their overall tax burden. Such provisions include lowering marginal tax rates, creating limitations on itemized deductions, and expanding standardized deductions.

Each of these provisions simplified the tax code for individual filers. These tax cuts directly increased disposable income, increasing investment and economic stimulus. Should these provisions expire in 2025, the reduced marginal tax rates would be changed to higher pre-TCJA levels. 

Additionally, the TCJA fostered a 4.7 percent increase in corporate investment, a significant achievement. This is due to the TCJA lowering the corporate income tax rate from 35 percent to 21 percent. This had the dual effect of making American corporations more competitive globally and allowing them more liquid assets to invest back into the economy. As policymakers create and analyze new tax legislation, they should continue to prioritize opportunities for corporate investment and encourage consumer participation.

The TCJA enhanced competitiveness among American businesses, specifically small businesses. One of the provisions that helped small businesses thrive is the 20 percent business deduction, or 199A deduction, for pass-through entities (businesses where profits flow through individual owners for taxation). Without this deduction, small-business owners would face significant tax increases. More than 33 million businesses are organized as pass-throughs, meaning that a crucial portion of the U.S. economy would be negatively affected. 

Extending the 199A provision would allow small businesses to continue to invest in expansion, innovation, research and development. This is critical in a high-inflation environment. Additionally, the 199A deduction gives these pass-through businesses a greater ability to compete with larger corporations. Smaller companies would lose their advantage if the 199A deduction is not extended, as larger corporations would still operate with the 21 percent rate. 

Another provision set to expire in 2025 that benefits businesses and working families is the cap on the state-and-local tax (SALT) deduction. The TCJA limited the deduction to $10,000 for individuals and pass-through businesses. The SALT deduction allows taxpayers to deduct state and local taxes from their federal returns. This part of the tax code is a subsidy for high-tax governments nationwide, with the rest of the nation taking the hit. Beyond retaining the cap, lawmakers should continue to investigate lowering the cap for individuals and businesses beyond $10,000 or zeroing out the deduction altogether.

Maintaining the changes to the alternative minimum tax (AMT) is crucial for taxpayers. The AMT system is complex and requires taxpayers to calculate their liability under two tax systems and pay the greater of the two. The TCJA effectively expanded exemptions from this complex system, aiding small businesses and the individual taxpayer. Allowing these AMT exemptions to expire would create significant burdens for taxpayers and open the door for litigious auditors at the IRS to seize on the confusion.

Lawmakers have an opportunity to build on the successes of the TCJA and make these tax cuts permanent. Keeping the tax code stable is a foundational element of tax reform. Stability is vital to working families and small-business owners who depend on a simple tax code when making economic decisions. Permanently extending pro-business and pro-worker provisions from the 2017 law will ensure the years ahead will be marked by financial stability and vibrancy.