What’s at Stake in the Tax Reform Debates: Taxpayer Watchdog Announces TCJA Countdown Clock

It may only be January, but for Congress and the American taxpayer, the countdown clock to the end of 2025 is already ticking, and it’s ticking loudly. Many crucial provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 will expire December 31 of this year. These provisions provided badly needed tax relief to Americans and played no small role in the prosperity enjoyed by Americans during the late 2010s. Congress has been negotiating a new tax package to extend, and improve upon, the TCJA, but thus far a final agreement has been elusive.

Today, the Taxpayers Protection Alliance (TPA) launched a countdown clock for the TCJA. The clock will highlight these issues (and the pressing need for action) for members of Congress and the public.

Important TCJA provisions that will sunset at year’s end include:

1. Marginal Tax Rates: The TCJA lowered marginal rates over multiple tax brackets. It also tweaked the thresholds for many brackets. These changes resulted in most filers (across brackets) receiving tax relief. If they are not renewed, more than three fifths of filers will pay higher taxes in 2026.
2. Standard Deduction: The TCJA increased the standard deduction for filers. This made it easier for Americans to lower their tax bill. The expiration of these provisions would cost taxpayers money and complicate the process of filing taxes, which might cause more Americans to spend additional funds hiring external help during filing season. 
3. Moving Expense Deduction: The TCJA limited eligibility for moving expenses to members of the armed services. Although this may seem like a tax increase, it is a beneficial simplification in the tax code for non-military filers, who received on net tax breaks as a result of the law. The best way to go about tax reform is to eliminate distortionary loopholes and carveouts and to slash general rates.
4. Charitable Contributions Deduction Cap: Taxpayers who donate to charities can deduct their philanthropy at tax time. The TCJA raised the threshold for cash donations to public charities from 50 percent of adjusted gross income to 60 percent. This allowed taxpayers to receive benefits for higher levels of charitable giving.
5. SALT Cap: The TJCA capped the state and local tax (SALT) deduction at $10,000. If the law is not extended, that cap will vanish. SALT deductions seek to mitigate the effects of state-level governance decisions, which, for economic and constitutional reasons, should not be a concern of the federal government. 
6. Personal Casualty and Theft Loss Deduction: Prior to the passage of the TCJA, all taxpayers could claim an itemized deduction for non-compensated personal casualty and theft losses. The TCJA added a limitation that restricted these claims to a disaster declared by the president. This provision further limited obscure and complex deductions, simplifying the tax code.
7. Itemized Deduction for Miscellaneous Expenses: The TCJA had removed filers’ ability to deduct miscellaneous expenses, such as unreimbursed employee expenses or tax preparation fees. The expiration of this provision would reintroduce a complex income-based formula that calculates the amount of miscellaneous expenses that can be deducted. The expiration of this provision would erase an important advancement in simplifying the tax code.
8. Overall Limitation on Itemized Deductions: Prior to the passing of the TCJA, itemized deductions were capped by a complex income-based formula. The TCJA removed this cap, allowing taxpayers to claim all the allowable deductions with no limit and simplifying the deduction scheme.
9. Removal of Payroll Tax Exclusions: The TCJA flattened and simplified payroll taxes by considering previously excluded benefits, such as moving or bicycle commuting reimbursement, as wage incomes. The expiration of this provision would allow these benefits to be considered non-taxable income for payroll tax calculations.
10. Alternative Minimum Tax (AMT): The AMT is a tax system (parallel to the tax code) which prevents taxpayers from eliminating their tax liabilities via deductions or credits. The TCJA had raised the exemption amounts for taxpayers filing under the AMT regime and introduced a scheme in which the exemptions would be phased out after filers crossed certain income levels. This provision was a welcome step to simplify the vastly complex AMT system and should not be allowed to expire.
11. Business 199A Deduction: The 199A deduction provides some necessary relief that prevents pass-through businesses incomes from being entirely taxed at individual income tax rates. By deducing a portion of the business’s income from consideration, the 199A set a more level playing field between pass-through businesses and traditional C corporations in terms of effective taxation.
12. Estate and Gift Tax Exclusion Threshold: The TCJA increased the threshold of assets which are not considered for estate and gift taxes to $10 million per decedent, adjustable to inflation (currently around $13.6 million). The increase is set to expire and be reduced to $5 million, which would then be subject to inflation adjustment.  

The TCJA’s reforms spurred investment and innovation and kept money in the pockets of Americans, where it belongs. For the sake of everyday Americans, businesses, and the economy at large, it is crucial that Congress moves to enact smart tax reform with all speed. Allowing the TCJA to lapse would be a colossal error.

In an ever more chaotic world, America’s global economic leadership depends on having sound tax policies that make it an attractive location for businesses and investment. The TCJA’s lowering of the corporate tax and its R&D tax credit are two examples of common-sense policies that drove American prosperity and competitiveness.

Tax relief for the average American is also very important. The effects of inflation are still making themselves felt, and allowing taxpayers to keep more of their hard-earned income would go far to alleviate these effects.

Congress should act — and the sooner the better — to cement the kind of tax policy that will boost American prosperity in the coming decades.

Tick-tock! The clock is ticking. Congress needs to act quickly to extend the TCJA.