Tax Tracker | Resources for the 2025 Tax Debate
Links for the coming fiscal fight.
Post election, tax policy will take center stage as the Republican’s 2017 tax cuts are scheduled to expire next year. Likely full Republican control of Washington means that Congress will pursue a tax package through the reconciliation budget procedure, which allows certain legislative changes to bypass the Senate filibuster with a simple majority. This post includes an overview of important resources for the coming tax debates.
This is the first installment of a new semi-regular tax digest feature at Liberty Taxed, cribbing from the excellent work done over at the Debt Dispatch by Cato’s Romina Boccia and her team. Through the end of the tax debate, I will collect relevant resources that should inform how Congress thinks about the expiration of the Tax Cuts and Jobs Act (TCJA). It’s an opportunity to highlight the work I’ve been doing over the past almost two years at Cato and the excellent work done by others in similar roles.
Re-reviewing the Tax Cuts and Jobs Act
On January 1, 2026, basically, all the individual tax cuts and some of the most economically consequential business provisions expire. There is wide bipartisan agreement on keeping most of the 2017 tax cuts. For example, Republicans and Democrats both agree on keeping the tax cuts for Americans earning less than $400,000 a year—which would reduce revenue somewhere in the ballpark of $3 trillion, depending on the details, or about two-thirds of the roughly $4.8 trillion ten-year impact. Republicans generally want to extend and expand the entire package of tax cuts.
As Congress debates the future of the tax code, it is important to understand what exactly the TCJA did and dispel many of the misperceptions about the reforms. To this end, I have a one-pager that lists all the expiring tax provisions and a TCJA frequently asked questions blog that answers questions like: “Who received a tax cut,” “Did the SALT limit raise taxes on the middle class,” and “what’s the difference between tax reform and tax cuts?” My Senate Budget Committee Testimony provides additional background on how the law supported economic growth, primarily through business investment. Summarizing recent academic research, the Tax Foundation concluded “that the TCJA’s corporate tax reforms substantially boosted domestic investment.”
The team over at the National Taxpayer’s Union Foundation has an in-depth explainer on all the 2025 expirations, and Andrew Lautz at the Bipartisan Policy Center has a series of topic-specific deep dives that are worth a read. Check out the Tax Policy Center’s TCJA explainers for a more critical view from the political left.
The Path(s) Forward in 2025
The coming year will present challenges and opportunities for tax and budget reform. As noted by the Economic Policy Innovation Center, “the extension in 2025 will need to be paired with spending reductions and other reforms.” Cutting spending is the only way to keep taxes low in the long run.
There is no shortage of ideas for Congress to achieve this.
The Cato tax plan lays out an aggressively pro-growth proposal for post-TCJA tax reform. The Cato plan is a roughly revenue-neutral reform that shows how Congress can slash tax rates to near 100-year lows by cutting the top income tax rate to 25 percent, the capital gains rate to 15 percent, and the corporate rate to 12 percent. It consolidates individual tax brackets to approximate a flat tax system, allows full expensing for all investments, and repeals the estate tax, alternative minimum tax, and net investment income tax.
To offset the revenue loss and improve the tax base, the Cato tax cuts are paired with eliminating more than $1.4 trillion in annual tax loopholes and other subsidies, including those for politically popular energy sources, families, education, housing, health care, and muni-bonds. Cato’s Chris Edwards has an in-depth explainer on tax expenditures and how Congress gets the definition wrong. Reforming the 1974 Budget Act could fix this problem.
Other outlines for 2025 reforms include:
The Tax Foundation outlines two revenue-neutral, pro-growth options for extending the TCJA, working within the law’s broader framework. The Tax Foundation has also proposed an entirely new tax system modeled on the Estonian flat tax.
Kyle Pomerleau and Donald Schneider outline two revenue-neutral, pro-growth options for extending the TCJA, one working within the law’s framework and another proposal that includes a new tax system for business income.
Matthew Dickerson at the Economic Policy Innovation Center provides background, principles, and specific reforms for preserving and expanding the TCJA.
Preston Brashers at the Heritage Foundation outlines five principles for tax reform that include driving economic growth by improving economic incentives, removing special interest carveouts, making tax change permanent, reducing marginal tax rates, and simplifying taxpaying.
Kimberly Clausing and Natasha Sarin outline a plan to extend and expand some of the TCJA low-income tax subsidy programs, let many of the individual tax cuts expire, increase taxes on businesses, estates, and investment income, and add a carbon tax to raise more than $3 trillion in new revenue over 10 years.
The Committee for a Responsible Federal Budget (CRFB) has a helpful summary of other broader budget proposals that include plans to address the expirations of the TCJA, including from the Progressive Policy Institute, American Action Forum, American Enterprise Institute, Bipartisan Policy Center, Manhattan Institute, and the CRFB Budget Blueprint.
Links to Resources on Other Hot Tax Topics
Paying for pro-growth tax cuts. The Tax Foundation recently noted that actual revenue outcomes post-TCJA surpassed both its own forecast and those of congressional scorekeepers. As I’ve explained, federal revenues have almost fully returned to the pre-tax cut level. However, to recreate the economic success of the 2017 tax cuts, the 2025 tax package will need to focus again on broadening the tax base and expanding the most pro-growth tax cuts, like permanent full expensing and other corporate tax cuts, instead of expensive tax credits and other narrowly targeted tax subsidies.
Tariffs and central planning. Tariffs and targeted tax preferences for domestic industry have a poor record of meeting their policy aims. As I’ve explained, Trump’s tariffs undermined the economic success of the TCJA, and recent experiences from industry-specific subsidies confirm their long track record of failures. Also, check out Scott Lincicome’s one-stop shop for debunking tariff myths.
Increasing the child tax credit. Some Republicans would like to increase the child tax credit, child care tax credit, and other family subsidies, proposals that come with potentially large fiscal costs and do not follow the successful model of the TCJA. Vanessa Brown Calder and I have explained why child tax subsidies are not well suited to alleviate child poverty, boost fertility, or mitigate the costs of raising children.
No tax on tips. Both Trump and Harris proposed making tip income tax-exempt, a change Tax Foundation’s Alex Muresianu notes comes “with the potential for unintended consequences for both consumers and the federal budget.” An assessment that is confirmed by Yale Budget Lab analysis. Proposals to exempt overtime pay and Social Security income face similar pitfalls.
Universal savings accounts. Any 2025 tax package should include a universal savings account, as proposed by Representative Diana Harshbarger (R‑TN-01), to allow more Americans to build independent financial security through a flexible, no-strings-attached investment account.