A tax hike is coming — and it’s not just for the rich



Academy Award-winner Elizabeth Taylor, married eight times to seven men, likely entered each union with the hope it would last. Good things, after all, should be permanent.

Yet in Washington, permanence is too often treated as a liability. Nowhere is this more apparent than in tax policy. Thanks to arcane rules surrounding budget reconciliation, Congress routinely enacts pro-growth reforms with an expiration date baked in.

A permanent extension of the reconciliation bill’s pro-growth elements would produce more ‘bang for the buck’ than a temporary extension.

Consider the House-passed One Big Beautiful Bill Act. Though the measure would extend and build upon President Donald Trump’s 2017 Tax Cuts and Jobs Act, it fails to permanently extend several of the law’s most pro-growth elements.

That’s a mistake. Again, good things should be permanent.

Pro-growth policies need permanence

Earlier this month, Unleash Prosperity Now — a nonprofit aligned with President Trump — organized a letter signed by more than 300 economists, myself included, urging Congress to “extend President Trump's tax cuts permanently to prevent a tax increase on January 1, 2026.”

Why do we insist upon permanence? Permanent pro-growth public policies result in better economic outcomes. In contrast, temporary policies create troublesome uncertainty, which, in turn, sows confusion for consumers and businesses, making financial planning and investment needlessly difficult.

A permanent extension of the reconciliation bill’s pro-growth elements would produce more economic “bang for the buck” than a temporary extension. It’s that simple.

According to the Tax Foundation, “Permanence for the [bill’s] four cost recovery provisions would more than double the long-run economic effect.” These provisions would include 100% bonus depreciation, expensing of research and development investment, and a more generous interest deduction limit, among others.

The Tax Foundation concludes:

The current package produces meager effects on GDP and a smaller U.S. capital stock over the long run because the cost recovery provisions sunset. As lawmakers continue to debate the tax package, they should not compromise on permanence for the most pro-growth provisions.

This view aligns with the prevailing economic literature. For example, a 2019 study by the St. Louis Federal Reserve concluded, “A rise in uncertainty is widely believed to have detrimental effects on macroeconomic, microeconomic, and financial market outcomes.”

If that warning were plastered on the side of a pack of cigarettes, it would read, “Congressionally induced policy uncertainty is hazardous to the country’s economic health.”

Jobs under threat

Fortunately, Senate Finance Committee Chairman Mike Crapo (R-Idaho) is determined to extend the reconciliation bill’s most pro-growth elements permanently. Bravo, Mr. Chairman!

Permanence aside, why did more than 300 economists call for preventing the tax increase scheduled under current law?

RELATED: I was against Trump’s ‘big, beautiful bill’ — Stephen Miller changed my mind

Photo by Chip Somodevilla/Getty Images

If taxes increase as planned, the economic fallout could be steep. Wells Fargo warns that average monthly job creation could plummet from 133,000 in the first quarter to just 25,000 next quarter — and then turn negative, with an estimated loss of 17,000 jobs per month in the fourth quarter.

If Congress fails to “spike the hike,” Wells Fargo estimates economic growth will slow to a tepid 1.1% this year and next.

A warning to deficit hawks

For those worried about the deficit, here's the paradox: Letting the economy slow — or worse, slip into recession — is the surest way to worsen the nation’s fiscal health.

To further underscore the situation, Douglas Holtz-Eakin, who directed the Congressional Budget Office from 2003 to 2005, cautions: “Given the weak state of the economy, it [the scheduled tax increase] would likely trigger a recession, and the budget outlook never gets better in a recession.”

Yes, it’s that simple.

Elizabeth Taylor once quipped, “If you hear of me getting married [again], slap me!” At least, she had the right intentions. Congress, on the other hand, routinely resorts to temporary policies to game the reconciliation process. That needs to stop.

To guard against recession, Congress should reconsider the tax increase scheduled for next year. But to boost economic growth, Congress should follow Crapo’s lead and extend permanently the 2017 Tax Cuts and Jobs Act pro-growth provisions.

SALT sellouts: GOP dumps red-state voters for New York Democrats



Every Republican ran for office last year promising to slash the record spending levels that fueled Biden-era inflation. Yet, every GOP proposal now adds to the deficit. Republicans can't agree on a single major program to cut. At the very least, one might expect them to eliminate federal subsidies that prop up blue-state Medicaid schemes and high-tax policies. Instead, they plan to burn their political capital shielding those same states from the consequences of their choices.

Forget “inflation” or “invasion.” The buzzword in Washington this month is “SALT.” Lifting the cap on the state and local tax deduction is the message GOP leaders chose to go with. Brilliant!

Blue-state Republicans should export red-state policies, not act as lobbyists for high-tax regimes.

Salt may season food, but in tax policy, SALT leaves a bitter taste. Before Trump’s 2017 tax reforms, taxpayers could deduct unlimited state and local taxes from their federal burden, with some restrictions for the wealthy under the old Alternative Minimum Tax. This allowed blue-state politicians to raise state income and property taxes knowing Washington would offset the pain through greater deficit spending. Trump’s bill capped SALT deductions at $10,000 and lowered federal rates across the board.

Now, a bloc of blue-state Republicans has hijacked the budget reconciliation process to push what amounts to an unlimited national subsidy for high-tax states. With existing tax cuts and Trump’s new priorities already straining the budget, these Republicans want to burn $1 trillion over 10 years to spare New York and California politicians from a taxpayer revolt.

After rounds of internal negotiation, House leaders offered a compromise: Raise the SALT cap to $30,000 for families earning less than $400,000. The SALT caucus rejected the offer. “A higher SALT cap isn’t a luxury. It’s a matter of fairness,” declared New York Republican Reps. Elise Stefanik, Andrew Garbarino, Nick LaLota, and Mike Lawler. Fairness? They want the rest of the country to go deeper into debt to prop up New York’s failed policies.

zimmytws via iStock/Getty Images

RELATED: The last march of the moderates

Blue-state Republicans should export red-state policies, not act as lobbyists for high-tax regimes. Their job is to pressure local Democrats to cut taxes — or to help conservative voters move out. Instead, they keep fueling blue-state profligacy and shielding the very politicians who caused the mess.

Worse still, these lukewarm Republicans want to spend over $1 trillion on blue-state tax breaks instead of using that money for broad-based tax cuts that would actually boost growth. They’ve even floated raising the cap to $62,000 for individuals and $124,000 for families, with no income limits. Most of those benefits would go to households earning over half a million dollars. For comparison, the Tax Foundation reports the average American pays about $13,890 in federal income taxes. Yet, these Republicans want to let wealthy blue-staters deduct nearly 10 times that amount.

And what of Donald Trump — the be-all and end-all of the Republican Party? He pressures the Freedom Caucus to drop its demands to end blue-state Medicaid grift, but he says nothing about the SALT holdouts. Instead, he endorsed Stefanik and Lawler for re-election.

Trump left New York for Florida to escape New York’s oppressive tax regime. So why back politicians who insist on making the rest of the country pay for it?

If Trump won’t rein in these RINOs, Republicans will head into the midterms without a message — and they’ll need smelling salts to revive a self-immolated mandate.

Want a recession? Kill this business deduction and wait



When President Donald Trump returned to office in January, nearly everyone in his circle agreed on the top priority: renewing the 2017 Tax Cuts and Jobs Act. Without action, a crushing 22% tax hike looms, threatening to undo the economic gains of the past decade.

Extending the tax reform would also give businesses and investors the long-term stability they need to plan, expand, and hire.

Repealing the C-SALT deduction would hammer small businesses — the backbone of the American economy.

Instead, the administration has sent mixed signals. Daily shifts in tariff policy have rattled markets and injected uncertainty into every sector of the economy. Investors are jittery. Business leaders are holding back. And analysts are already warning of a potential recession.

These mistakes make it even more important to switch the focus to the tax package. The Trump administration should stop talking about tariffs and focus, along with Congress, on stabilizing markets and laying the foundation for economic growth by getting taxes down.

C-SALT: A conservative’s dream

The Tax Cuts and Jobs Act delivered everything conservatives had long demanded: 100% expensing for business property, a 21% corporate income tax rate, and a child tax credit that rewarded work. It stood as the defining achievement of Trump’s first term. Making it permanent could help revive the pre-COVID economic boom.

But lawmakers must resist the temptation to gut the law’s pro-growth provisions to fund unrelated priorities. That includes rejecting the misguided push to repeal or limit the corporate state and local tax deduction, known as C-SALT.

Debates about the individual SALT deduction cap have dominated headlines in Washington. Some reforms to that cap may make sense. But individual SALT and C-SALT are not the same issue, and they shouldn’t be treated as interchangeable.

C-SALT promotes growth by preventing double taxation on businesses. It lets employers reinvest earnings, stay competitive, and create jobs. Rolling it back would hit business owners hard, slow hiring, and weaken America’s edge in the global economy.

Policy groups like Americans for Tax Reform and the Tax Foundation agree: Gutting C-SALT would put long-term growth at risk — and betray the core economic agenda that fueled Trump’s first-term success.

For businesses, state and local taxes are an operating expense. If businesses lose the ability to deduct these taxes, they will be paying taxes on taxes.

Small businesses pay the price

Repealing the C-SALT deduction would hammer small businesses — the backbone of the American economy. Many already struggle under heavy corporate, state, and local tax burdens, especially in rural and Republican-leaning states. Removing this deduction would force them to shoulder a disproportionate share of the pain.

No serious conservative case exists for eliminating or capping the C-SALT deduction. Some Republicans seem confused, conflating C-SALT with the personal SALT deduction, which overwhelmingly benefits wealthy taxpayers in high-tax blue states. But they are not the same. As the Tax Foundation notes, capping C-SALT won’t “reduce distortive tax benefits or enhance state competition” the way a cap on the personal SALT deduction might — because corporate and individual tax systems function differently.

In 2023, American businesses paid nearly $1.1 trillion in state and local taxes. Stripping away their ability to deduct those taxes from federal corporate income tax amounts to a massive tax hike — potentially hundreds of billions of dollars over the next decade.

That kind of tax increase would erase much of the economic progress since the 2017 tax law was passed. It would punish the very job creators conservatives claim to champion.

Lawmakers in Congress — especially Republicans who support free enterprise and pro-growth tax reform that spurs economic growth — should focus on restoring and making permanent the 2017 Tax Cuts and Jobs Act’s tax cuts without jeopardizing the benefits that the C-SALT deduction provides for American businesses of all sizes.

Entrepreneurs need certainty, not higher taxes, to succeed



As lawmakers return to Washington, D.C., after a long and hard-fought election season, they will begin to set priorities for the upcoming session. The economy and inflation remain the top concerns for Americans and small businesses. We need to make sure we embrace policies that help them thrive. Extending the 2017 tax law is a crucial step toward providing small businesses with the security they need.

The 2017 tax law transformed the small business landscape, enabling owners to reinvest more earnings into their operations. This spurred job creation, investments in new equipment, and the launch of new ventures. By lowering the tax burden on small businesses, the law fueled historic wage growth and brought unemployment to record lows.

Lawmakers can either increase uncertainty by raising taxes or negotiate in good faith to build on the 2017 reforms.

Policymakers should always aim to support economic growth and stability. The road map Congress laid out six years ago remains clear. Neither Congress nor the next president should undo those reforms so soon, especially while high inflation and interest rates strain entrepreneurs. Lawmakers must assess potential outcomes carefully. If there is no agreement on lowering rates, why not maintain the current tax levels instead?

During my time at the U.S. Small Business Administration’s Office of Entrepreneurial Development, we helped thousands of entrepreneurs nationwide start and grow their businesses. Washington’s economic policies played a crucial role in our success. Today, I worry that lawmakers are too eager to raise taxes on small businesses instead of exploring ways to help entrepreneurs invest more in their employees.

The Tax Foundation’s latest research shows that avoiding corporate tax increases could boost U.S. economic output by 1.7%, wages by 1.5%, and employment by 381,000 full-time jobs. These gains would come at about half the cost of the Inflation Reduction Act’s green energy tax credits and the CHIPS and Science Act’s tax credits, grants, and spending programs.

I understand where our new incumbents and candidates in Congress are coming from. Most were not involved in negotiating the 2017 law, and many believe that reshaping America’s tax code will fight inequality for generations. The reality, however, is that the taxes Washington is considering raising will likely harm the middle class the most. A narrow-minded “higher taxes” approach won’t solve America’s spending issues or help us compete in the global economy of the future.

As the next Congress debates whether to maintain or raise the corporate tax rate, we face a critical decision. Lawmakers can either increase uncertainty by raising taxes or negotiate in good faith to build on the 2017 reforms. Allowing entrepreneurs to reinvest in their workforce will benefit the economy far more than higher taxes.

Politicians must remember that voters have a real choice in deciding who should pay taxes and how much. By reviewing data from the past six years, lawmakers should recognize the success of the 2017 tax policies. Maintaining the current tax rate and extending key provisions would deliver the greatest long-term benefits to the economy and the middle class.

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