Treasury: Trump tax cuts could benefit higher earners

President-elect Donald Trump

Treasury: Trump tax cuts could benefit higher earners

WASHINGTON (Reuters) - At the top of Republicans’ 100-day agenda with President-elect Donald Trump in the White House and most Republican lawmakers is a plan to renew about $4 trillion in expiring tax cuts.

The U.S. Treasury Department on Friday released a new analysis of the various ways the government might be charged with extending the expiring individual and estate tax provisions in Trump’s 2017 tax overhaul — known as the Tax Cuts and Jobs Act — and who would benefit most directly from a permanent extension of the legislation.

For example, the Treasury Department’s Office of Tax Analysis estimates that the top 0.1% of earners would get a $314,000 tax cut under a full extension of the individual and estate tax provisions, with the total cost of those tax cuts reaching $4.2 trillion between 2026 and 2035.

If the tax cuts were extended only to households earning $400,000 or less a year — a promise made by President Joe Biden and Vice President Kamala Harris during the 2024 campaign — that would reduce the cost of extending the expiring Tax Cuts and Jobs Act provisions to $1.8 trillion, or less than half the cost of extending all of the individual and estate tax cuts.

A Treasury official said the full analysis is intended to give Congress options for the tough choices ahead — namely, how to pay for the tax cuts as the federal debt stands at more than $36 trillion.

The Tax Cuts and Jobs Act, the biggest tax overhaul in a generation, is the signature domestic achievement of Trump’s first term and a defining issue that could define his return to the White House.

Trump favors extending all expiring provisions, while Republicans have committed to cutting federal spending. How to pay for the tax extensions while meeting the next president’s demands could make negotiations in Congress difficult.

In addition to his plan to extend the tax cuts, Trump has floated proposals in the 2024 campaign that target working—and middle-class Americans, such as exempting earned tips, Social Security benefits, and overtime pay from income tax.

Lawmakers are also considering temporarily doubling the $10,000 cap on state and local tax deductions for most married couples, which the Committee for a Responsible Federal Budget estimates would cut revenue by $170 billion.

Republicans have promised to eliminate energy tax credits provided by Biden’s Inflation Reduction Act and increase income taxes for the wealthiest Americans.

The Tax Cuts and Jobs Act temporarily changed the individual tax code, which will expire at the end of 2025.

The Urban-Brookings Tax Policy Center reported in July that households earning about $450,000 or more would receive more than 45 percent of the benefits of extending key provisions of the 2017 law.

The Penn Wharton Budget Model estimates that permanently extending the Tax Cuts and Jobs Act would increase the deficit by $4 trillion over the next decade.

Republicans argue that tax cuts stimulate economic growth, as lower taxes generate additional economic activity. “Many of the Tax Cuts and Jobs Act provisions were designed to promote greater economic growth,” Neil Bradley and Watson McLeish of the U.S. Chamber of Commerce said in an August report.