The Tax Cuts and Jobs Act (TCJA) was the most significant tax law to be enacted in nearly two decades. The law lowered tax rates for individuals and businesses while overhauling many tax rules. Most of the individual tax provisions and a handful of business provisions are scheduled to expire in the next few years. As the expiration of those provisions nears, decisions about extension — in part or in whole — and the effect on the federal deficit must be considered.

The Congressional Budget Office (CBO) projects that extending the TCJA would increase deficits by $4.6 trillion over 10 years, $0.6 trillion of which would result from additional interest payments. Most of the primary cost would stem from the set of policies that reduced individual income tax payments, including changes to tax brackets and rates, an increased threshold for the alternative minimum tax, and an increase in the standard deduction. The expiring individual income tax provisions also include policies that offset some of the costs. Those provisions include the suspension of deductions for personal exemptions as well as the reduction or repeal of certain itemized deductions such as the state and local tax deduction and the mortgage interest deduction.

The cost of extending expiring business tax provisions would be less than one-sixth the cost of the individual provisions, in large part because the most costly business tax provisions — including the reduced corporate income tax rate — were made permanent when the TCJA was enacted.