A number of the changes enacted as part of P.L. 115-97, commonly referred to as the "Tax Cuts and Jobs Act" or TCJA, are temporary. Many of these provisions, particularly those affecting individuals and families, are scheduled to expire at the end of 2025. Others affecting businesses, including pass-through businesses, are scheduled to expire between 2025 and 2028. This In Focus provides background on the TCJA, discusses possible economic and distributional effects related to the expiration of TCJA provisions, and examines potential issues for Congress moving forward. For a description of specific TCJA expiring tax provisions, see CRS Report R47846, Reference Table: Expiring Provisions in the "Tax Cuts and Jobs Act" (TCJA, P.L. 115-97), by Margot L. Crandall-Hollick, Donald J. Marples, and Brendan McDermott.
Overview of TCJA
The TCJA substantively changed the federal tax system. Broadly, for individuals, the act temporarily modified income tax rates. Some deductions, credits, and exemptions for individuals were eliminated, while others were substantively modified, with these changes generally being temporary. For businesses, the effective tax rate on pass-through entities was reduced via a new deduction, which is also temporary. The statutory corporate tax rate was permanently reduced. Many deductions, credits, and other provisions for businesses were also modified. The act also substantively changed the way international corporations are taxed, generally moving the U.S. corporate tax toward a territorial system. The Joint Committee on Taxation (JCT) estimated that the TCJA would reduce federal tax collections by $1.46 trillion over the 10-year budget window, FY2018-FY2027.
Expiring TCJA Individual Provisions
The majority of the TCJA provisions affecting individuals are scheduled to expire, though several of the individual provisions are permanent. The expiring provisions include the elimination of personal exemptions for taxpayers and dependents and increases in both the standard deduction and the size of the child tax credit. Changes to various itemized deductions and the alternative minimum tax will also expire. In May 2023, the Congressional Budget Office estimated that extending these individual tax provisions would reduce federal tax collections by $2 trillion over the 10-year budget window, FY2024-FY2033.
Expiring TCJA Business Provisions
Several TCJA provisions affecting businesses are scheduled to expire or be modified, though the majority of the business provisions are permanent. The expiring provisions affect the expensing of business investment, the 20% deduction for certain business income, and the deductibility of employer-provided meals. Several other provisions related to cross-border business activity are also scheduled to change over the next several years. In May 2023, the Congressional Budget Office estimated that extending these business tax provisions would reduce federal tax collections by $953 billion over the 10-year budget window, FY2024-FY2033.
Other Expiring TCJA Provisions
The TCJA also contained several other provisions scheduled to expire that are often thought of separately from provisions affecting individuals and businesses. The TCJA temporarily created an employer credit for paid family and medical leave and modified the estate tax deduction. In May 2023, the Congressional Budget Office estimated that extending the estate tax provision would reduce federal tax collections by $126 billion over the 10-year budget window, FY2024-FY2033.
TCJA Distributional Analysis
Distributional analysis of the TCJA is complicated by a number of factors—including how to allocate changes to the corporate tax system to individuals and that each provision has a unique distributional effect. Distributional estimates from a variety of sources (JCT, Urban-Brookings Tax Policy Center, the Tax Foundation, Penn Wharton Budget Model) did, however, generally project that the TCJA would initially reduce tax burdens across the income distribution, with the largest reductions going to taxpayers in the top 20% (quintile) of the income distribution. Preliminary empirical analysis of select corporate tax changes in the TCJA supports the findings of these estimates. Upon the expiration of the TCJA provisions, these estimates also generally agreed that the remaining benefits would largely go to taxpayers in the top quintile.