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Writer's pictureJoe Carson

Trump's Economic Team Is "Legislatively Dreaming": Odds of Extending 2017 Tax Cuts Are Low

One key theme of the former president's Donald Trump agenda is extending the 2017 tax cuts. While popular with the voters and companies and equity market-friendly, is it legislatively possible to do so? CBO baseline deficit projections use current law (which means the 2017 tax cuts expire at the end of 2025). Based on current tax law, CBO estimates deficits will run between $1.8 and $2 trillion for the next five years, or four times the 2017 budget deficit. Extending the tax cuts would increase the budget deficit by several hundred billion annually. Would Congress, even if the Republicans controlled both houses, agree to such a deal? The Trump team is legislatively dreaming if they think such a deal could pass Congress, even if they try to offset the revenue loss with spending cuts in domestic entitlement programs (which undoubtedly would even lose Republican support). But to get elected, one only has to propose (or dream) things and then blame the opponents when they fail to pass. Equity investors must be aware of the downside risks of not extending 2017 tax cuts, as there would be a significant hit to company profits.

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