The Tax Cuts and Jobs Act (TCJA) of 2017 remains one of the crowning achievements of President Trump’s first term. It lowered both corporate and individual tax rates, simplified the tax code, and delivered real benefits to everyday Americans. However, the tax-policy priorities President Trump has laid out for his second term could undermine one of the greatest successes of the TCJA: its simplification of the tax system.
One of the most significant aspects of the TCJA was the dramatic streamlining of the tax code. Before the law, Americans faced complex, often confusing tax returns riddled with deductions, credits, and exemptions. The TCJA simplified this process by doubling the standard deduction, allowing roughly 90 percent of Americans to file their taxes without the need for complicated paperwork. Special carve-outs that had long favored special interests were limited or eliminated, making the tax system fairer and more efficient.
A prime example of this simplification was the capping of the state and local tax (SALT) deduction at $10,000. Prior to the TCJA, wealthy individuals in high-tax states could deduct an unlimited amount of their state and local taxes, allowing them to shift some of their tax burden to residents of lower-tax states. By capping the SALT deduction, the TCJA curtailed this preferential treatment for the wealthy, while also offsetting some of the deficit effects of the tax cuts, such as updating the Alternative Minimum Tax, which benefited far fewer households after the reform.
However, as the expiration of many of the individual tax cuts looms at the end of this year, President Trump has met with lawmakers to outline his tax policy priorities for a second term. Unfortunately, these priorities risk reintroducing the very complexities and imbalances that the TCJA worked so hard to eliminate. Trump's proposals include fully renewing the 2017 tax cuts, adjusting the SALT cap, and creating new exemptions for tips, Social Security benefits, and overtime pay.
While extending the tax cuts would undoubtedly provide a short-term economic boost, the costs are staggering. The Congressional Budget Office estimates that extending the tax cuts alone could add about $4.6 trillion to the deficit. Fully eliminating the SALT cap could add another $1.2 trillion, and Trump's proposed exemptions for tips, Social Security, and overtime would cost over $2 trillion. That brings the total to nearly $8 trillion in lost revenue—an unsustainable figure.
In comparison, Trump’s suggested offsets to cover these losses, such as taxing carried interest as ordinary income, would raise only a fraction of the required amount—around $12 billion over a decade. In the face of these deficit-busting proposals, it becomes clear that these tax cuts, without corresponding spending cuts or savings elsewhere in the budget, would add significantly to the nation’s growing debt.
Moreover, Trump’s new special exemptions for various groups he seeks to woo—such as seniors, unionized workers, and residents of high-tax states—would deliver little economic impact. A proposal to increase the SALT deduction cap would benefit a relatively small number of high-income individuals in blue states, leaving the burden of financing this giveaway to the taxpayers of lower-tax states. This would not only exacerbate economic inequality, but it would also insulate blue states from feeling the full consequences of their liberal fiscal policies.
Instead of reintroducing more complexity and unfairness into the tax system, Republicans should focus on reforms that deliver broader economic benefits. One such reform would be allowing businesses to immediately expense capital investments—a far more impactful and efficient way to spur growth and job creation than more targeted giveaways to special interest groups.
As lawmakers begin to debate the details of Trump's tax proposals, Republicans would be wise to remember the key lesson of the 2017 tax reform: simplicity is essential for both fairness and long-term fiscal health. Tax cuts without offsets will only exacerbate the deficit, while new carve-outs and exemptions will again make the tax code more complicated and less effective. It’s time to keep tax policy simple, sensible, and focused on broad-based growth, rather than catering to special interests at the cost of the nation’s future.
In the coming months, Republicans have an opportunity to build on the success of the 2017 tax reform. The question is whether they will choose to pursue policies that work for the American people—or whether they’ll fall prey to the old habits of excessive spending and special-interest giveaways. The time for simplicity and fiscal responsibility is now.
