Janice R. Andrews
The Tax Cuts and Jobs Act (TCJA) of 2017 made big changes to the U.S. tax system. It was signed into law by President Trump. The federal estate tax limit was raised, the standard deduction was nearly doubled, and individual income tax rates were dropped. But these tax cuts are set to end at the end of 2025, which could mean that many Americans will have to pay much higher taxes. People who live in certain states could see big increases in their tax bills if the law isn’t extended or changed.
What Happens When Tax Cuts End
When the TCJA ends, taxes might go up for everyone, but the effect will be very different based on where people live. A new study by the Tax Foundation, a neutral think tank, says that some states will be hit harder than others.
People who live in Massachusetts are expected to see the biggest rise in their yearly tax bill. If the tax cuts end and business taxes go up as planned, the average Massachusetts voter could see their taxes go up by $4,682 a year. People who live in Washington state will soon see their taxes go up by $4,429, and people who live in Wyoming could see their taxes go up by an average of $4,312 a year.
When the TCJA ends, taxes could go up by an average of $3,746 per year, even in Washington, D.C., where taxes are already high. On a national level, if all the tax breaks end at the same time, the average taxpayer’s yearly tax bill could go up by $2,853.
Effects on Congressional District
The Tax Foundation also looked at the possible changes to taxes in a more detailed way by looking at how much more each voter in each congressional district usually pays in taxes. For example, the average tax hike for people in the congressional district that includes the San Francisco area is expected to be $16,127, which is the highest in the country.
These numbers show how the TCJA’s end could have a big effect on people’s finances, especially those with better incomes. The Wall Street Journal says that these families would be hit the hardest by the expiration, which could make the average tax rises in some districts look different.
Historical Background and Predictions for the Future
When the TCJA was first put into effect in 2017, it changed the tax code in ways that were different for each household based on their location, income, and family structure. People with high incomes who live in places without income taxes, like Florida, Wyoming, and Nevada, benefited the most. On the other hand, people who lived in high-tax places like New York and New Jersey saw smaller drops in their tax bills.
If the tax cuts end, these impacts might go back to how they were, which could mean big tax increases in states that got the most out of the TCJA. Three of the ten states that are expected to see the biggest average tax hikes are Wyoming, Nevada, and Florida. These states do not have individual income taxes.
The Political Debate and What Could Happen
When the TCJA ends, it will likely cause politicians from both parties to argue as they try to figure out how to avoid higher taxes. Former President Donald Trump wants to keep the tax cuts in place for families making less than $400,000 a year, while Democrats want to extend the cuts.
The Wall Street Journal says it’s not likely that the TCJA will fully expire. But the talks in 2025 are likely to be difficult, and a multitrillion-dollar deal could be reached. The Tax Foundation says that it would cost about $3.8 trillion over the next 10 years, from 2025 to 2034, to continue the TCJA’s individual and business rules. This does not include changes to the estate tax.
Trump wants to continue the current tax cuts and also make more cuts. For example, he wants to get rid of taxes on tips and Social Security benefits and lower the business tax rate from 21% to 15%. Also, Vice President Kamala Harris wants to get rid of taxes on tips, make the child tax credit bigger, and keep the tax cuts for people making up to $400,000.
The discussion over the future of the TCJA is likely to get heated as its end date draws near. This will have big effects on taxes all over the United States.
