Republicans planning for ‘total tax cliff’ when Trump’s term ends in 2028

Congressional Republicans have submitted a law proposal that may result in a major “tax cliff” by the end of President Donald Trump’s second term in an attempt to extend certain tax breaks while letting others expire. 

The proposed changes, embedded in the House-passed version of the GOP’s domestic agenda bill, could cause a political and fiscal showdown in the years leading to the 2028 election.

The Republican-led House seeks to make the 2017 Tax Cuts and Jobs Act (TCJA) permanent, but a host of new tax cuts pitched by Trump are scheduled to lapse in 2028. The cuts include a standard tax deduction, deductions for seniors, the child tax credit, and an exemption on tips, overtime pay, and auto loan interest.

House Freedom Caucus Chair and Maryland Rep Andy Harris believes the legislation will become a talking point for the next presidential candidates. 

“It means that’s going to be an issue in the next presidential race,” Harris said on Tuesday.

Temporary cuts target working-class voters

The expiring provisions are mostly the ones Trump introduced in the lead-up to the 2024 election that won him votes from targeted constituencies. 

In October, while speaking in Detroit, Trump proposed making auto loan interest fully deductible. The suggestion followed another he had hinted at four months prior, at an event in Las Vegas, to remove taxes on tips for hospitality workers in Nevada. 

In New York, he announced a tax credit for family caregivers, a demographic that includes over four million residents in the state.

In total, at least seven targeted tax initiatives were proposed between September and October, according to a Reuters tally.

Yet, these worker-focused cuts are scheduled to become obsolete at the end of 2028 under the current House legislation, unlike the TCJA’s enactment that benefit corporations and higher-income earners, which Republicans are pushing to make permanent.

“There’s a total tax cliff in there. There’s about $1.5 trillion worth of taxes that expire in four or five years,” Texas Rep Chip Roy said in a press briefing last week. “This is why we end up with the same problem.”

Senate split on tax cuts

The bill is expected to undergo revisions in the Senate, where budget changes in the accounting baseline may allow up to $5.5 trillion in tax cuts to be excluded from official deficit projections. 

Still, many Senate Republicans appear willing to maintain the split, making business-focused cuts permanent and allowing Trump’s newer worker-focused cuts to expire.

“If it’s good enough to include, let’s make it permanent,” reckoned Senator Ron Johnson, a member of the Senate Finance Committee. “Let’s have that discussion.”

Senator John Hoeven also supported the extension of tax provisions, although he was unconvinced about social-focused items like the expanded child tax credit. 

“Something like the child tax credit, with a huge transfer payment aspect to it, I’d have to say that’s something I’d have to check on,” Hoeven remarked last week.

However, budget watchdogs warn that the structure of the bill, with expirations and accounting tricks, could make the US deficit situation worse.

The Congressional Budget Office (CBO) estimated that the House-passed tax package would add $2.4 trillion to federal deficits over the next decade. A subsequent analysis requested by Democrats included interest payments and pushed the total impact to $3 trillion.

The Joint Committee on Taxation (JCT) projected only minimal economic gains from the plan. It estimated that GDP would rise from 1.83% to just 1.86% in the long run.

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