Lawmakers discuss tax expiration ahead of 2025, calling it a "make-or-break moment."

• Lawmakers are discussing policy choices that may affect millions of families and small businesses due to the scheduled expiration of trillions in tax breaks after 2025.
• The federal budget and America's middle class will face a decisive moment, according to Senate Finance Committee Chairman Ron Wyden, D-Ore., who made the statement on Thursday.
• Amid growing concerns about the federal budget deficit, negotiations could be challenging, experts warn.

Lawmakers are discussing policy choices that may affect millions of families and small businesses due to the scheduled expiration of trillions in tax breaks after 2025.

The Tax Cuts and Jobs Act, enacted by former President Donald Trump in 2017, brought about significant tax changes, including temporary provisions that will expire after 2025 unless Congress takes action.

The law also permanently reduced the top corporate tax rate to 21%.

The TCJA provisions that are set to expire include lower federal income tax brackets, larger standard deductions, a more generous child tax credit, higher gift and estate tax exemptions, and a 20% tax break for pass-through businesses.

The federal budget and America's middle class will face a decisive moment, according to Senate Finance Committee Chairman Ron Wyden, D-Ore., who made this statement at a Senate hearing on Thursday.

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If the temporary provisions of the TCJA expire after 2025, more than 60% of tax filers could see an increase in their taxes, according to estimates from the Tax Foundation.

With an uncertain future control of the White House and Congress, it is difficult to predict which provisions, if any, will be extended amidst competing priorities.

Before the 2025 deadline, various tax issues are being supported by lawmakers and organizations.

Small business tax break is 'crucial'

Numerous small enterprises are concerned about the qualified business income deduction (QBI), which allows for up to 20% of eligible income to be deducted, but is subject to certain restrictions.

Pass-through businesses, such as sole proprietors, partnerships, S-corporations, trusts, and estates, are eligible for the temporary TCJA tax break.

The National Federation of Independent Business, represented by Jeff Brabant, vice president of federal government relations, emphasized the need for the QBI deduction to be made permanent, as it serves about 300,000 small and independent businesses.

At the Senate hearing on Thursday, he stated that the 20% small business deduction's creation has been vital to small business owners' survival.

The small business economy has faced numerous challenges, including a pandemic that shuttered businesses for extended periods, soaring inflation, and a historically tight job market, as stated by him.

Debate over the child tax credit

Indivar Dutta-Gupta, a visiting fellow at Georgetown University and tax fellow at Roosevelt Institute, also supported the expansion of the child tax credit.

Dutta-Gupta stated to Senate lawmakers on Thursday that the child tax credit is a crucial way to enhance the after-tax income of working families.

The American Rescue Plan in 2021 increased the maximum child tax credit to $3,000 or $3,600 per child, from $2,000, and provided monthly payments to families.

In 2021, the child poverty rate reached a record low of 5.2%, mainly due to the increase in the number of children covered by the program, according to a study by Columbia University.

The U.S. Census Bureau reported that childhood poverty more than doubled in 2022, jumping to 12.4%, and then increased to 13.7% in 2023 after pandemic relief expired.

Concerns over the federal budget deficit

Negotiations for TCJA extensions will be challenging due to increasing concerns over the federal budget deficit, experts predict.

This year, the U.S. Department of the Treasury reported that the federal government has already exceeded $1 trillion in spending on interest for its $35.3 trillion national debt.

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