Congress faces a major “fiscal cliff” in 2025, when the individual components of the Tax Cuts and Jobs Act of 2017, also known as the Trump tax cuts, expire. This year’s election will largely determine the fate of trillions of dollars in tax cuts and the policy direction for years to come. At stake are the individual tax rates, the doubled standard deduction, the increased child tax credit, the new tax break for corporations filing as individuals, and the increased estate tax exemptions. Washington Examiner This week, we present a series on the most important aspects of this major tax dispute. The first article examined how the corporate tax rate is likely to become a key negotiating point. The second article reported on the dispute over the child tax allowance. This third story explains what would happen if the tax breaks expire.

Key provisions of the Tax Cuts and Jobs Act of 2017, also known as the “Trump tax cuts,” expire at the end of 2025. If Congress does not act, significant tax increases and a blow to trade could occur.

The future of the expiring provisions is expected to be determined by the combination of Democrats and Republicans who gain control of both houses of Congress and the White House in November. Here’s what to expect if the provisions do indeed expire, and proposals to keep or replace the TCJA.

What expires at the end of 2025?

The 2017 tax cut permanently revised the Corporate Tax Act, including by reducing the corporate tax rate from 35% to 21%. However, all individual provisions are expiring, including the reduced tax rates.

Other provisions that will expire include the doubled $2,000 child tax credit, the doubled standard deduction, the expanded estate tax exemptions, and the elimination of the alternative minimum tax. A new special tax break for businesses that file their tax returns on the individual side of the law will also expire.

In addition, measures that were intended to compensate for the tax cuts with higher revenues are expiring. This includes, in particular, the limitation of deductions for state and local taxes paid to $10,000, or SALT for short. Lawmakers in high-tax states have been trying to raise the SALT cap for years.

What would the expiration mean for the taxpayer?

If no action is taken on the TCJA’s phase-out provisions, the majority of taxpayers will face net tax increases, according to an analysis by the Tax Foundation.

The amount of the tax increase would depend on the taxpayer’s circumstances.

For example, a single person with no dependents earning $75,000 a year would have to pay $1,707.75 more in taxes each year or accept a 2.73% decrease in net income.

Married taxpayers with two children and an annual income of $165,000 would pay $2,450.50 more in taxes each year, or earn 1.73% less net income.

The effects would be visible when taxpayers file their 2026 taxes in early 2027, giving lawmakers a little more time to adjust tax law after the provisions expire.

Overall, the Tax Foundation found that extending the tax cuts would increase net incomes for all income groups. For those in the middle quintile, the increase would be 1.9 percent in 2026. For the top 1 percent, it would be 4.8 percent.

As the SALT cap expires, potentially bringing some relief to taxpayers, said Garrett Watson, a senior policy analyst and modeling manager at the Tax Foundation, the Washington Examiner that the other provisions being eliminated, particularly the tax rates themselves and the higher alternative minimum tax exemptions, would largely offset the benefits of eliminating the SALT deduction cap.

“The long and short of it is that we’re doing all of this,” Watson said. “Most taxpayers, the vast majority of these people, are better off under the current law than they would have been in a world under the previous law where the SALT cap didn’t exist, and that would continue to be the case in the future for all of those reasons.”

What other effects would the abolition of the regulations have?

Raising income taxes would discourage people from working, saving for the future and investing in the economy, the Tax Foundation says, hurting economic growth. According to the group’s model, extending the tax cuts would increase gross domestic product by 1.1% over time and create more than 900,000 jobs.

However, an extension of the tax cuts would also reduce the federal government’s revenues and increase its budget deficits.

In total, this would cost $3.5 trillion over the 10-year budget period and increase the national debt-to-GDP ratio by 25.5 percentage points. However, these figures do not take into account the revenue generated by the additional economic growth resulting from the lower tax rates. Taking this “dynamic effect” into account, the debt-to-GDP ratio would only increase by 19 percentage points, according to the Tax Foundation.

Another model, the Penn Wharton Budget Model, concluded that if the expiring provisions were extended, debt would rise and gross domestic product would only experience a “modest increase in GDP of 0.2 percent” through 2054. It also concluded that there would be modest increases in “capital stock and hours worked.”

What proposals are there to maintain parts of the tax cuts?

The future of the Trump tax cuts will depend on the partisan makeup of Congress and the White House next year, with the race for both chambers and the presidency widely seen as open questions.

Republicans have promised to work to make the expiring provisions permanent.

Former President Donald Trump also called for the elimination of taxes on benefits and tips for restaurant and hospitality workers.

Vice President Kamala Harris called for maintaining tax cuts for people earning $400,000 a year, which Watson said would generate $2.3 trillion in additional revenue.

Another idea to generate revenue to offset some proposed tax changes would be to increase the corporate tax rate from 21% to 28%. President Joe Biden has included the proposal in his 2025 budget.

With power in Washington divided between the two houses of Congress and the White House, the path forward is less clear, but there could be consideration of either extending the sunset provisions temporarily or dealing with them later.

“If there is a standstill or they just don’t make it across the finish line next year, then the temptation is to try multiple options,” Watson told the Washington Examiner.

He explained that the provisions don’t expire until the end of 2025, so people won’t have to deal with the changes until 2026, and most won’t see them until they file their 2026 tax returns in early 2027.

“So it might be tempting to push this back to ’26,” Watson said. “The other option is actually to keep the status quo but extend it temporarily for a year or two and, if possible, postpone the whole debate for another year or two.”

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“There is actually a protocol precedent for this,” Watson added, pointing to the temporary extension of the Bush tax cuts in the early 2010s.

Regardless of what happens with the majority in Congress and the White House, Watson believes the cap on the SALT tax deduction must be kept in mind. In order to eliminate it or increase it, a new source of revenue would have to be found.