The Fate of the Tax Cuts and Jobs Act Post-2024 Elections: What Investors Need to Know
As the Tax Cuts and Jobs Act (TCJA) passed under President Trump in 2017 is set to expire on December 31, 2025, the discussions about its extension or lapse are heating up. This decision will have significant implications for tax rates, the federal budget, and economic growth in the United States.
If the TCJA expires completely, a tax hike could occur in 2026, potentially tightening fiscal policy. However, economists believe this alone may not push the U.S. into a recession, with only a modest impact on economic growth expected. On the other hand, extending the TCJA in full would come with a hefty fiscal cost, adding around $4.6 trillion to the federal deficit over the next decade.
Looking ahead, potential policy changes will depend on the 2024 election outcome. Republicans are more inclined to extend or expand the TCJA, while Democrats might opt for a partial extension. Vice President Harris, for example, supports extending tax cuts for those earning under $400,000 per year but letting them expire for higher earners.
Regardless of the election results, the macroeconomic effects of any changes to the TCJA are not likely to be felt until 2026. This gives lawmakers time to negotiate a solution, with a Republican sweep possibly leading to a full extension or further tax cuts, and a Democratic victory potentially resulting in a more limited continuation of the law.
In conclusion, the fate of the TCJA post-2024 elections will have significant implications for investors, affecting tax rates, the federal budget, and economic growth. It is crucial for individuals to stay informed about these developments and consider how they may impact their financial decisions moving forward.