Trump tax cuts, if made permanent, stand to benefit the highest income earners but not the middle-class families. In 2025, if the TCJA (Tax Cuts and Jobs Act) provisions are not extended, most middle-class taxpayers will see their tax rates go up. For instance, the 22% tax bracket would revert to 25%. The 24% bracket would go back to 28%, and the 33% bracket could rise again to 36%.
This would mean higher taxes for those in the middle-income brackets, reducing disposable income for families that had been benefiting from the lower rates since the TCJA passed. Under the TCJA, the standard deduction was nearly doubled.
In 2025, it will revert to its pre-2017 levels unless it is extended. Around $6,350 for single filers and $12,700 for married couples compared to $12,550 and $25,100 in 2021. The TCJA increased the child tax credit from $1,000 to $2,000 per child, and it made it partially refundable, meaning more families received refunds even if they did not owe much in taxes.
If the tax cuts expire, the child tax credit would return to $1,000 per child, and the refundable portion would be reduced. In the event that the child tax credit shrinks, many middle-class families with children could see a significant reduction in their tax refunds or an increase in their tax liabilities.
The TCJA limited the State and Local Tax (SALT) deduction to $10,000, which affected middle-class families in high-tax states hard. If the tax cuts are reversed, the SALT deduction will be to $10,000, which affectsmiddle-class families in high-tax states especially hard. If the tax cuts are reversed, the SALT cap may remain in place, which may still affect many middle-income households that pay substantial state and local taxes. For people in high-tax areas, this means they will still be unable to deduct more than $10,000 in state and local taxes, potentially leading to higher effective taxes.
The medical expense deduction in 2017-2018, the TCJA temporarily cut the medical expense deduction threshold from 10% to 7.5% of income. If the tax savings expire, the threshold will revert to 10%. This could make it more difficult for middle-class households with high medical bills to qualify for this deduction.
Critics of the tax cuts believe that the lost revenue (from lower taxes) will eventually lead to larger deficits and national debt. Over time, this might result in cuts to government programs such as Social Security, Medicare and other public services that many middle-class families rely on. If those programs are decreased or altered, middle-class families may face higher costs for health care, education or retirement savings, canceling out any earlier tax breaks. Some proponents of tax cuts say that lower taxes for firms and individuals lead to increased economic growth and job creation.
However, the long-term ramifications of such development are unknown and many of the benefits, such as corporate tax cuts, may not have translated directly into wage growth for the typical worker. If the tax cuts cause the economy to grow more slowly by 2025, middle-class earnings may not rise considerably, making the greater tax burden more difficult to bear.
If Congress chooses to prolong or amend the tax cuts rather than allowing them to expire, the extensions of individual tax cuts, including lower rates, a greater standard deduction and an expanded child tax credit, would result in ongoing advantages for the middle class. However, a possible scenario that can also happen is that some tax cuts may be adjusted to focus on more particular middle-class advantages.
For example, expanding the child tax credit or making SALT deductions more flexible, although this is subject to the political situation in 2025. Ultimately, without extensions, the middle class will most certainly face higher taxes in 2025, with the overall impact determined by factors such as economic growth, changes in government spending, and any new tax laws introduced in the interim.
I think it is pretty likely that the tax cuts for the middle class would stay in place, or even be expanded. Trump and his party have been strong advocates for lower taxes, especially for businesses and individuals, and they will likely want to maintain that momentum for his base. There is a strong political incentive to keep taxes low for middle-class voters who have benefited from the cuts. Plus, Trump’s administration focused on cutting taxes as a core policy, so it would probably be a priority to keep those cuts going as long as possible. Of course, economic factors could always change the equation, but as long as the tax cuts are popular and the economy is at least stable, it seems likely they would be extended or not reversed during his time in office.