Here at Tiana’s Take, we have repeatedly warned of the dire consequences of Congress failing to extend the individual tax provisions of President Donald Trump’s 2017 Tax Cuts and Jobs Act, which are set to expire at the end of the year.
But there’s a major caveat, spurred by recent reports that the White House is considering raising taxes on high-earning Americans and corporations as part of the GOP’s 2025 tax legislation. So, you can trust that I don’t say the following lightly: An extension of the TCJA that raises either the top marginal income tax rate or, even more egregious, the corporate tax rate is not a “tax cut” at all. It would simply be a bill not worth enacting by the Republican-controlled Congress and Trump.
Even though the TCJA made the 21% flat corporate tax rate permanent, at least one Senate Republican is trying to include a tax hike as a pay-for. Although Trump campaigned on cutting the corporate tax rate to 15%, the White House has shockingly refused to rule out the prospect.
Raising the corporate tax rate would not only undermine Trump’s entire tariff campaign, which was specifically aimed at reshoring American industries, but it would also harm the economic growth Trump was elected to unleash.
Furthermore, a corporate tax cut is more likely to raise federal revenue. Despite the fervent fearmongering about the corporate tax rate cut before the TCJA was originally passed, the total corporate income tax revenue collected by the federal government has doubled since 2017, and as a share of our annual economic output, it’s up 20%.
Congressional Republicans are much more brazen about the prospect of raising the top individual income tax rate from the TCJA’s margin of 37%. House Freedom Caucus Chairman Andy Harris (R-MD) is calling a 40% tax bracket a “reasonable way to pay for” a raft of new tax cuts Congress is looking to pass later this year.
As with the corporate tax rate increase proposal, then-President Joe Biden called for letting the top marginal income tax rate expire. The Cato Institute found that, under this proposal and in tandem with federal Medicare taxes, top marginal rates would be sure to reach a minimum of more than 42% in states with no income tax, with effective rates creeping up close to 60% in states like California and New York. Combine this with the lunacy that is the likely lifting of the cap on the state and local tax deduction, and we’ll have wealthy red state residents bankrolling a tax hike, only for Govs. Gavin Newsom (D-CA) and Kathy Hochul (D-NY) to receive all the benefits.
The “one big, beautiful bill,” so far as it exists, has metastasized into a Frankenstein’s monster of special interest giveaways. On top of the $4 trillion cost over the decade of a clean TCJA extension, the stipulations likely to make the final cut are reportedly no tax on Social Security (total cost over the next decade: at least $1.5 trillion), no tax on tips ($200 billion), increasing the SALT deduction cap to as much as $100,000 for single filers and $200,000 for joint ($1.1 trillion), and at least another $300 billion on increased spending for defense and border security.
We’re looking at what, a minimum price tag of over $7 trillion? And we have to raid the revenues of job creators to do it?
TRUMP GIVES DEMOCRATS OPENING TO REGAIN VOTER TRUST ON THE ECONOMY
No dice. If Republicans, especially the shameless RINOs of the Senate, aren’t serious about cutting actual spending — how about all of those Department of Government Efficiency savings, or better yet, the $800 billion in cuts House Republicans identified in the monstrosity that is Medicaid — then they don’t deserve to claim victory with a tax cut. The modern monetary theorists and SALT obsessives who have taken the GOP hostage may rightly see that fiscal hawks are indeed desperate to get a TCJA extension across the finish line, and they’ll indeed accept a hell of a lot of pork to do it.
But they shouldn’t do anything. Hiking taxes ought to be the red line for Republicans. Otherwise, they might as well call themselves Democrats.