SCOTT SIMON, HOST:
Republicans like cutting taxes. They did it when Ronald Reagan was in office and again under George W. Bush. Donald Trump prioritized tax cuts when he was last in the White House, and he has promised more of them. Lawmakers will likely try to avoid ballooning the already large federal debt. However, NPR's Scott Horsley joins us. Scott, thanks so much for being with us.
SCOTT HORSLEY, BYLINE: Good to be with you.
SIMON: President-elect Trump promised to extend tax cuts he passed during his first term in office during this last campaign. Likely to get his way?
HORSLEY: He's likely to get at least some of what he promised. You know, right now the individual tax cuts that Trump pushed through back in 2017 are set to expire at the end of next year. So if Congress does nothing, a lot of people would see their taxes go up in 2026. Now, congressional Republicans don't want to let that happen, but extending all those cuts would reduce the government's revenues by more than $4 trillion over the next decade. And Joseph Rosenberg, who's with the Tax Policy Center, says even in Washington, that's enough to give lawmakers some heartburn.
JOSEPH ROSENBERG: They're really going to have to figure out if that's a price tag they're willing to swallow or if they need to scale back or find offsets for those tax cuts.
HORSLEY: Lawmakers could try to offset the $4 trillion by lowering spending or raising revenue elsewhere. They could also scale back the tax cuts by making them temporary. That's what they did in 2017, and that's why the cuts are now set to expire and why we're having this conversation.
SIMON: And in 2017, the Trump administration said the tax cuts would pay for themselves 'cause they would foster greater economic growth. Did that happen?
HORSLEY: Not even close. And that's one reason that the government was running nearly a trillion-dollar annual deficit even before the pandemic. Erica York is a senior economist at the Tax Foundation, which generally advocates lower taxes, but she concedes extending these individual tax cuts is not going to turbocharge economic growth.
ERICA YORK: We are talking about letting people keep more of their money, boosting their after-tax income, but it's not, like, a tax cut that's targeted at brand-new investment or a tax cut that has, like, a really large bang for the buck.
HORSLEY: In fact, congressional forecasters said a couple of weeks ago whether these tax cuts get extended or not won't make a big difference to the overall economy.
SIMON: What do you think lawmakers might do to try and help balance the cost?
HORSLEY: Well, they could roll back some of the green energy tax breaks that were added under the Biden administration. That might save up to a trillion dollars over a decade. They could also try to trim other federal spending, although Trump has already taken the biggest government programs off the table - Social Security and Medicare. The president-elect has also suggested he could use money from tariffs to replace some of the lost tax revenue. But Joseph Rosenberg notes that's putting money into people's left pocket only to take it out of their right.
ROSENBERG: There's pretty universal agreement that the main effect of tariffs is to increase prices on U.S. consumers. So that is going to further strain American households that, you know, are already struggling to buy food and other necessities.
SIMON: Scott, who benefits from the tax cuts in the end?
HORSLEY: You know, lots of people benefited from the 2017 tax cuts. The lion's share went to the wealthy, but working people saved money as well. For working families, though, those savings could be erased by the higher costs of Trump's tariffs.
SIMON: NPR's Scott Horsley. Thanks so much.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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