Congressional Budget Office (CBO): Allowing 2017 tax cuts to expire as scheduled would benefit the economy in the long term. Individual income and estate tax portions of the Tax Cuts and Jobs Act (TCJA) are set to expire after 2025. Keeping those provisions in place, as Republicans would like to do, could cost about $4 trillion in revenue over the next decade. A new CBO analysis explains that allowing those provisions to expire as scheduled would help the economy grow in the long run. Higher marginal tax rates would hamper growth through 2028, but lower deficits would improve growth starting in 2029, CBO estimates. However, Republicans have argued that the TCJA boosted growth more than government forecasts show.
Republicans weigh tax cuts amid legislative priorities and deficit concerns. As President-elect Donald Trump prepares to take office, Republicans are strategizing on how to retain expiring portions of the TCJA while addressing other pressing legislative priorities. The Washington Post highlights competing GOP visions for using the reconciliation process, with the Senate leaning toward focusing first on immigration, energy, and defense, while House leaders push for immediate action on taxes.
Navigating tax cuts next year may be tough for Trump and Congressional Republicans. TPC’s Howard Gleckman walks through the budget process and reconciliation rules—largely tied to finding “pay-fors” for tax cuts over a ten-year period. “If lawmakers are not able to agree on deep, longer-term spending cuts or tax increases, GOP lawmakers may be forced to extend all the individual provisions of the TCJA only temporarily, instead of making those 2017 tax cuts permanent,” concludes Gleckman.
California AI tax project stumbles due to human error. California’s effort to use artificial intelligence (AI) for processing tax returns hit a setback after a calculation error led to the rescission of a nearly $900,000 contract with Deloitte Consulting. As reported by Tax Notes (paywall), the error was discovered during the scoring process for contractor proposals, prompting the state to halt the project and return unused funds to the general fund. The California Department of Tax and Fee Administration is now evaluating next steps.
Trump tariffs could raise prices amid consumer pushback. Economic pressures stemming from inflation, supply chain issues, and the pandemic are leading companies to lower prices or increase discounts to retain customers. But new Trump-era tariffs could reverse this trend. Richmond Fed President Tom Barkin told attendees at the CNBC CFO Council Summit that the barrier to raising prices has historically been lower during periods of trade tension.
Kenya reinstates key taxes amid fiscal crisis. Kenya’s parliament approved reinstating several tax measures it abandoned earlier this year following widespread protests. According to Bloomberg, these include raising import taxes, introducing a minimum tax for multinationals, and taxing foreign firms operating digital marketplaces. The measures aim to meet commitments to the International Monetary Fund as Kenya grapples with mounting debt and revenue shortfalls. However, lawmakers rejected both a proposed levy on infrastructure bonds and an increase in taxes on phone and internet services, given past public opposition.
For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky.
