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Understanding the Budgetary Baseline Debate
Taxes might soon rise for millions of Americans if Congress doesn't act by January 1, 2026. This is because the provisions of the Tax Cuts and Jobs Act (TCJA) are set to expire. While lawmakers discuss ways to address this potential cliff, the approach to measuring the budgetary impact of extending these cuts is a hot topic. Sen. Mike Crapo suggests using a "current policy baseline" rather than the "current law baseline." This means planning for future budgets as if extending the TCJA tax cuts would have no additional impact on revenue.
The Impact on Taxpayers and Government Debt
If the TCJA isn't extended, a significant tax increase awaits nearly 62% of tax filers. On average, taxpayers could face a $2,853 hike with the expiration of individual provisions. However, if lawmakers adopt the current policy baseline for future budgeting, the deficits and national debt could rise as the extension would show zero immediate budget impact. Yet, this doesn't change the actual forecast for increased debt due to lower revenue under extended tax cuts, adding complexity to already intricate fiscal planning.
Why Should You Care?
Most taxpayers are unaware of the looming tax changes. Understanding the potential changes can help individuals better prepare for future financial planning. By learning about these baseline debates, you can have informed discussions and perhaps contribute to a community-wide awareness, ensuring everyone is better prepared for any financial shifts that may come their way.
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