Here’s why the cost of extending Trump’s tax cuts just surged by nearly $1 trillion

11 Jan 2025, 00:44 by https://www.facebook.com/17108852506 · AlterNet

U.S. House Speaker Mike Johnson (R-LA) attends a press conference following a House Republican conference meeting on Capitol Hill in Washington, U.S., December 17, 2024. REUTERS/Elizabeth Frantz
Carl Gibson
January 11, 2025Push Notification

If Congress doesn't act quickly to extend the provisions in President-elect Donald Trump's 2017 Tax Cuts and Jobs Act, it could blow an even bigger hole in the federal budget.

That's according to Politico, which reported that the U.S. Treasury Department just pegged its estimate for the total 10-year cost of extending the tax cuts (which overwhelmingly benefit the richest Americans) at $5.5 trillion. That's a significantly higher number than the $4.6 trillion estimate from the Congressional Budget Office.

The crux of the increased cost is due to the timetable the Treasury Department used when coming to its figure. In calculating the cost of extending every provision of the 2017 legislation, the U.S. Treasury went by the fiscal year rather than the calendar year, with fiscal year 2026 beginning on October 1. Politico reports this is due to estimators' assumption that Congress would be unable to agree on a final tax cut package prior to the end of fiscal year 2025, due to the likelihood of negotiations lasting several months and even past the month-long August recess this summer.

This method means the relatively cheaper year of 2025 is replaced in the 10-year timeline and replaced with the much more costly fiscal year of 2035. Under this accounting method, the cost of the tax cut extension shoots up by roughly $600 billion that year.

Nearly 40 provisions in the 2017 law are set to expire this year, and because Senate Majority Leader John Thune (R-S.D.) has already signaled that the Republican majority's first legislative priority is tackling the immigration system and the Southern border, that issue may take up the bulk of Trump's first 100 days of his second term. One unnamed Republican lobbyist recently confided to Politico that they weren't confident Congress would want to go right into a second hard-fought legislative battle right after the border bill, and suggested that a tax cut extension may not happen at all in 2025.

Additionally, the House of Representatives' paper-thin majority is likely to hamper Republicans' efforts to ram through much of Trump's legislative agenda. If Reps. Elise Stefanik (R-N.Y.) and Mike Waltz (R-Fla.) end up joining the Trump administration as United Nations ambassador and National Security Advisor, respectively, it would whittle down House Speaker Mike Johnson's majority to just one seat.

The prospect of Johnson uniting his conference around every bill is unlikely, given the multiple fractious elements of the House Republican majority. Last week, 10 Republicans co-signed a letter indicating that their support for the speaker was contingent on him heeding their various demands, which included a hard stance against raising the debt ceiling and authorizing new federal spending without offsetting budget cuts.