Trump's tax cuts spark debate as expiration date looms

As the 2025 expiration date for former President Donald Trump's signature tax cuts looms, a debate is brewing in Washington over its impact on the nation's fiscal health.

In a recent interview with Yahoo Finance, Treasury Secretary Janet Yellen said that she blames Trump's 2017 Tax Cuts and Jobs Act for the ballooning budget deficit and $34.8 trillion national debt.

"I think it's responsible for many of the problems that we face now with our fiscal trajectory," Yellen said.

The nonpartisan Congressional Budget Office (CBO) estimates that extending these tax cuts for another decade could add a whopping $4.6 trillion to the deficit.

The Tax Cuts and Jobs Act of 2017, Trump's signature legislation, slashed the corporate tax rate from 35% to 21%, trimmed income tax rates across most brackets, and nearly doubled the standard deduction for individuals.

Proponents argued that putting more money back into the hands of corporations and consumers would spur a boom in investment and spending, ultimately trickling down to benefit the entire economy.

However, critics contend that the promised economic gains never materialized for the average American.

Are Trump’s tax cuts fueling the economy or feeding the deficit?

Supporters argue Trump-era tax cuts have been a shot in the arm for the U.S. economy.

Jay Hatfield, CEO of Infrastructure Capital Advisors, believes they've played a key role in America's recent economic winning streak compared to other developed nations.

"It's critical to global competitiveness," Hatfield said, suggesting that lower tax rates help keep U.S. companies from fleeing to tax-friendly countries and encourage investment in growth and innovation.

Currently, the U.S. corporate tax rate sits at 21%, below the 23.7% average among the 38 wealthy OECD nations. But if Trump's cuts expire, that rate will jump to 35%, potentially making other countries more attractive for businesses.

Critics, including Treasury Secretary Yellen, paint a different picture. They argue the tax cuts have primarily benefited wealthy corporations and individuals while driving up the national debt.

Lindsay Owens, executive director at the progressive think tank Groundwork Collaborative, argues the law “was never intended to help everyday people”

“It served as a windfall for the wealthy and corporations—the same corporations that have jacked up prices and scored record profits. It’s time to reverse the damage,” said Owens.

Yellen hints at letting tax cuts expire, backs Biden’s deficit plan

While Yellen didn't straight up say it's time to let the tax cuts expire, she did drop a pretty big hint.

In her interview, Yellen argued she had "concern" about the economic implications of extending the cuts and instead advocated for Biden's proposed $3 trillion, 10-year deficit reduction plan.

“​​I think the most important metric in judging sustainability is the interest cost of the debt, and the interest cost of the debt, even with higher interest rates, is at normal historical levels,” she said.

“If we engage in deficit reduction so that it stays at this level, I think…we will be on a fiscally sustainable course.”