Discover How the New Tax Law Could Boost Your Wallet and Propel Job Growth!

With an imminent automatic tax hike looming at the end of 2025 as a result of the expiration of the 2017 tax cuts, lawmakers in Congress are now faced with the crucial task of evaluating their options to prevent this potential revenue increase. The need for comprehensive analysis of tax revenues since the adoption of the 2017 law has become paramount as they gear up for future legislative decisions.

Let’s delve into the various aspects surrounding revenue forecasting and how it has evolved over the years:

• The forecasting done by Tax Foundation and the Congressional Budget Office (CBO) before and after the passage of the Tax Cuts and Jobs Act (TCJA) in 2017 laid the groundwork for understanding potential revenue changes.
• Federal revenues have shown a significant increase above the projections made in 2017 and 2018, with personal income and payroll taxes playing a crucial role in bolstering revenues amidst various global challenges.
• The unpredictability of events such as trade wars, pandemics, geopolitical conflicts, and legislative actions like massive fiscal packages and the CHIPS Act in 2022 has further impacted tax revenues, making accurate forecasts a challenging task.

Now, let’s compare the forecasts made in 2017 and 2018 to the actual revenue outcomes:

• Pre-TCJA CBO baseline projections estimated federal revenues to be $4.55 trillion by 2024, while the dynamic and static projections by Tax Foundation placed revenues at $4.62 trillion and $4.48 trillion, respectively, in the same year.
• The CBO released additional projections in April 2018, suggesting revenues of $4.44 trillion by 2024, accounting for the impact of the TCJA.
• The current projection for 2024 stands at $4.9 trillion, indicating a significant deviation from the initial forecasts made in 2017 and 2018.

Key takeaways from the comparison between forecasts and actual revenues:

• Actual revenues surpassed the pre-TCJA CBO baseline projections earlier than anticipated, showcasing a more positive revenue picture than initially assessed in 2017 by Tax Foundation.
• While actual revenues have exceeded the 2017 baseline in recent years, there remains a significant gap below the pre-TCJA CBO baseline, adjusted for inflation.
• Despite the positive revenue outcomes, it is evident that the TCJA has not been able to fully offset its costs, emphasizing the limitations of revenue forecasting models.

As we move forward, it is vital for lawmakers to carefully consider these revenue trends from the past years while acknowledging the inherent uncertainties that come with forecasting. While estimates can provide valuable insights, it is essential to recognize the unpredictable nature of future events that may impact revenue outcomes. Stay informed about tax policies affecting you and be prepared for potential changes on the horizon.