Budget Reconciliation: Trump Tax Cuts by 2025
What is Budget Reconciliation?
In 2017, Republicans used a procedure called budget reconciliation to pass the TCJA. Democrats used it to pass the American Rescue Plan Act in 2021 and the Inflation Reduction Act in 2022. Reconciliation is an option that allows for a quick implementation of tax, spending and debt limit changes as outlined in a Budget Resolution. This avoids the filibustering in the Senate, which would require 60 votes. Budget reconciliation allows Republicans to rely on a party-line vote for legislation, but they still face slim majorities in both chambers.
Lawmakers can specify targets or limits on reductions or increases in the deficit within the budget window. The “Byrd Rule” limits what can go into a reconciliation bill. It prohibits policy changes that do not affect spending or revenues, and changes that increase deficits outside of the budget period. Reconciliation also specifically prohibits changes to Social Security.
What is the Tax Cuts and Jobs Act?
The 2017 Trump Tax Cuts, formerly known as the Tax Cuts and Jobs Act (TCJA), reduced average tax burdens for taxpayers across the income spectrum and temporarily simplified the tax filing process through structural reforms. It also boosted investment by reforming corporate tax systems and improving the international tax system. Without congressional action, 62 per cent of filers may soon face a tax hike relative to current policy by 2026. At the same time, the price tag for extending the 2017 Trump tax cuts is in the trillions.
tax Calculator Interactive map TCJA Archives
The Path Forward: Principled, Pro-Growth, Fiscally Responsible Tax Reform
Congress is staring down the expiration of the TCJA, and the Tax Foundation is prepared to provide insight and analysis on the policies at stake. The Tax Foundation team has studied TCJA’s underlying structure and its strengths and weaknesses since its enactment. We have also analyzed fundamental reforms that would dramatically improve the US tax system to support economic growth as well as greater efficiency and simplicity.
Whether lawmakers target fundamental tax reform or follow the outline of the TCJA, they will confront decisions on what to prioritize in this forthcoming round of tax reform. In that regard, staying within the overall TCJA construct, the Tax Foundation team has analyzed difficult, but revenue-neutral ways to build a pro-growth set of reform options that would not significantly worsen the deficit once changes to the economy are considered or substantially change the distribution of the tax burden across the income scale.
Related Resources
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- : New Directions in Tax Policy: Budgetary and Other Challenges of an Increasingly Complex Tax Code See moreAnalysis
- : Making the TCJA Permanent: Economic, Revenue, and Distributional Effects See moreReport
- : Options for Navigating the 2025 Tax Cuts and Jobs Act Expirations See moreCalculator
- : How the TCJA’s Expiration Will Affect You See moreMap
- : The Impact of TCJA Expirations by Congressional District See moreResearch
- : The Tax Cuts and Jobs Act See moreFundamental Reform
- : Growth & Opportunity Tax Plan See moreOur Model
- : An Overview of the Methodology See more
