Extending the Trump Tax Cuts Would Harm the Economy and Raise Consumer Borrowing Costs While Pushing Up Debt

A new report from the nonpartisan Congressional Budget Office finds that extending the Tax Cuts and Jobs Act (TCJA) would hurt—not help—the economy.

Building an Economy for All, Budget, Economy, Middle-Class Economics, Taxes, Trump Administration +3 More

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Most of the provisions of the 2017 Trump tax law that affect households as well as some of the provisions that affect businesses are set to expire at the end of 2025. A new report released Friday from the nonpartisan Congressional Budget Office (CBO) finds that extending these tax cuts without paying for them would make the economy worse—not better. In fact, the extension of these tax cuts would raise costs of consumer borrowing, such as car loans, student loans, and mortgages:

Economic growth would be faster in the first several years after the extension of the tax provisions and slower over the longer term than in the extended baseline, and interest rates would be higher.

The CBO found that there would be a small amount of near-term boost to growth. However, over time, extending the tax cuts—which disproportionately flow to the richest Americans, giving the top 0.1 percent a $278,000 tax cut—would harm the economy, with the harm growing over time.

FIGURE 1

Extending these tax cuts would meaningfully push up debt as a percentage of the gross domestic product (GDP), leaving it 47 percentage points higher in 2054 than if they expire as scheduled. A previous Center for American Progress analysis found that extending the Trump tax cuts would increase upward pressure on the debt-to-GDP ratio by more than 50 percent.

FIGURE 2

The author would like to thank Emily Gee, Colin Seeberger, Madeline Shepherd, Lily Roberts, and Shannon Baker-Branstetter for helpful thoughts and suggestions.

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Bobby Kogan

Senior Director, Federal Budget Policy

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Extending the Trump Tax Cuts Would Harm the Economy and Raise Consumer Borrowing Costs While Pushing Up Debt