Tax Cuts or Time Bombs? What’s at Stake as the TCJA Clock Ticks Down

By January 1, 2026, millions of Americans could face higher taxes as key provisions of the Tax Cuts and Jobs Act (TCJA) are set to expire. While lawmakers debate how to navigate this fiscal cliff, one less-obvious issue could reshape the discussion: how to measure the budgetary impact of extending these tax cuts.

Baseline Showdown: A Budget Battle of Perspectives Sen. Mike Crapo, poised to lead the Senate Finance Committee, suggests using a current policy baseline to evaluate the TCJA extension. In plain terms, this assumes tax cuts will continue indefinitely, avoiding their “cost” on paper. However, critics argue that this accounting approach doesn’t reflect reality it’s like pretending an empty bank account is full because you hope for a future deposit.

Using a current law baseline, which measures taxes as written, the TCJA’s permanent extension could lower federal revenues by a staggering $4.2 trillion over 10 years. That’s a fiscal weight we can’t ignore.

What Does This Mean for the Economy? If the TCJA expires, 62% of taxpayers could face an average increase of $2,853. But extending the cuts without offsetting revenue would drive deficits to over 6.6% of GDP by 2027. It’s a lose-lose if handled poorly.

The real challenge is balancing tax policy with fiscal responsibility. Lawmakers could:

• Introduce offsets like spending reforms or closing loopholes.
• Explore pro-growth tax code overhauls to increase revenue sustainably.
• Focus on meaningful reforms instead of convenient accounting tricks.

The Bigger Picture: Growth, Deficits, and Reality Extending the TCJA without addressing deficits would risk long-term economic stability. While proponents argue it could sustain growth, lawmakers must decide if they’re preventing a tax hike or just delaying tough decisions.

History offers a cautionary tale: during the 2012 fiscal cliff negotiations, similar debates unfolded, with lawmakers claiming deficit reductions that didn’t hold up to scrutiny.

The takeaway? Adjusting baselines might simplify the rhetoric, but it doesn’t solve the problem. If fiscal responsibility and pro-growth policies are the goal, bold, strategic action is non-negotiable.

At Criterion Business Services, we specialize in making sense of complex tax laws and helping business owners navigate financial challenges.

Reach out to us at [email protected] or give us a call at +1 (832)-788-3120. You can also visit our website: www.criterionbiz.net.

How do you think Congress should approach the TCJA expiration? Let’s discuss in the comments!