As taxpayers struggle to pay their federal income tax, every American should be aware that President Biden and Congressional Democrats are planning to raise their taxes next year.
The 2017 Tax Cuts and Jobs Act cut individual and business taxes, reducing individual rates across the board and reducing the corporate tax rate from the highest in the world to a more competitive rate. Many of these tax cuts are scheduled to expire at the end of next year, and unless Congress acts, millions of taxpayers will be hit with a significant tax increase.
President Biden says the tax cuts are “tax giveaways” to the very wealthy and big corporations, and that if he is President next year he will make sure the tax cuts expire and “stay expired.”
If the tax cuts are not extended, the U.S. economy will be hit by a a $3.5 trillion tax increase, and most of the tax increase will fall on individual taxpayers and working families. According to the Joint Committee on Taxation, more than three-quarters of the individual tax cuts went to taxpayers earning less than $500,000 a year. Taxpayers earning under $100,000 will face an average tax increase of 16% a year.
President Biden and Congressional Democrats see the expiration of the tax cuts as an easy opportunity to raise trillions of dollars of new revenues without taking a single vote. His latest budget failed to include any mention of extending the tax cuts. By letting them expire, trillions of dollars of new revenue would be added on top of the $5 trillion in tax increases he already has proposed in his budget.
Proponents of higher taxes in Washington claim it would “cost” the federal government $3.5 trillion to extend the tax cuts. In the real world, taxpayers are the ones who would bear the “cost” of letting the tax cuts expire.
A much better way to offset the cost of extending the tax cuts would be to reduce federal spending by a comparable amount. The federal government is set to spend nearly $83 trillion over the next ten years under current law, according to the CBO. Congress could pay for extending the tax cuts and avoid the tax increases by spending just 4.2% less than planned over the next ten years.
If the tax cuts are not extended, Congress will spend every dollar of the new revenue in the coming years. The latest CBO budget review proves the point. In the first six months of fiscal 2024, the federal deficit is already at $1.1 trillion, on track for another $2 trillion deficit. A shortage of tax revenue is not the problem. Federal revenues are up 7%, and corporate revenues are up 35%. The problem is federal spending, which keeps going up and up.
Instead of raising taxes on every American, Congress needs to get serious about reducing the growth of federal spending.
Unless Congress Acts, the Tax Cuts and Jobs Act Will Sunset
April 13, 2024
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