Brace for Big Tax Hikes in 2026 Unless Congress Acts

Published

1 year ago

May 14, 2024

admin

Most Americans face tax hikes starting in 2026, and the increased federal tax bite will come about without Congress lifting a finger. That’s because 2017’s Tax Cuts and Jobs Act (TCJA) expires at the end of 2025, and despite some politicians’ contrary claims, a majority of Americans benefited from that law. The end of tax cuts for so many people necessarily results in corresponding increases to come.

The Rattler is a weekly newsletter from J.D. Tuccille. If you care about government overreach and tangible threats to everyday liberty, this is for you. Email(Required) CommentsThis field is for validation purposes and should be left unchanged. Submit

Δ Tax Cuts for Most, but With a Time Limit

“Unless Congress acts, the vast majority of Americans will see higher, more complicated taxes beginning in 2026 as major provisions from the Tax Cuts and Jobs Act of 2017 expire,” warns the Tax Foundation. “The TCJA reduced average tax burdens for taxpayers across the income spectrum and temporarily simplified the tax filing process through structural reforms. It also boosted capital investment by reforming the corporate tax system and significantly improved the international tax system.”

The widespread benefits of the TCJA shouldn’t be a matter for debate. But there’s confusion because Team Biden and fans of high taxes fibbed about the law leading up to the 2020 presidential election.

“Biden’s false claim that no one but the rich got Trump’s tax cuts,” headlined a 2019 Washington Post Glenn Kessler piece about the debate over the law. “Most Americans received a tax cut,” he added.

“About 65 percent of households paid less in individual income taxes in 2018 as a result of the TCJA,” wrote the Tax Policy Center’s Howard Gleckman. “About 6 percent paid more. The rest paid about the same.”

Adjusting for all federal taxes under pre-TCJA law, the Cato Institute’s Chris Edwards commented, “lower? and middle??income groups received the largest relative individual income tax cuts.”

So, there’s widespread agreement that a law which cut taxes for most Americans is poised to expire, resulting in higher taxes. But, just as the benefits of the tax cuts varied across the population, so will the size of the bite taken by tax increases starting in 2026. Tax Hikes for All

“The largest average tax hikes would be experienced by taxpayers who reside in California’s congressional districts,” note the Tax Foundation’s Garrett Watson and Erica York. “For example, the congressional district covering the San Francisco area would see an average tax hike of $16,127 per taxpayer, the highest in the U.S. By contrast, northern New York City would see an average tax increase of $807 per taxpayer under TCJA expiration.”

That link takes you to a tool that lets you look up the estimated impact of TCJA expiration on taxpayers in states and congressional districts across the country.

Separately, the Tax Foundation published a tax calculator that lets you estimate the impact of TCJA expiration on you and your family, given specifics such as marital status, income, number of children, and choice of standard or itemized deductions. The calculator accounts for “most aspects of the federal individual income tax code except provisions related to business and self-employed income.”

That said, extending the TCJA’s tax cuts has high costs of its own since that would reduce the amount of money collected by the federal government to spend on its projects. Tax Cuts and Tradeoffs

“Federal tax revenues would fall by more than $4 trillion on a conventional basis and by nearly $3.5 trillion on a dynamic basis over the coming decade; and without spending cuts, debt and deficits would increase,” concedes a May Tax Foundation report on options regarding the law.

“By the year 2050, permanent extension of TCJA laws would reduce federal revenues from 18.4 percent to 17.1 percent of annual Gross Domestic Product (GDP),” Jagadeesh Gokhale and Mariko Paulson of the University of Pennsylvania’s Penn Wharton Budget Model specify. “Federal debt held by the public would rise from 226.0 percent of GDP to 261.1 percent by 2050.”

But that decrease in revenue and corresponding rise in debt and deficits may matter only if it hampers a serious plan to control the federal government’s ongoing spending spree. Separately, the Penn Wharton Budget Model predicts that “a maximum debt-GDP ratio of 200 percent can be sustained even if investors believe (maybe myopically) that a closure rule will then prevent that ratio from increasing into the future.” They say the real ceiling on federal debt is more like 175 percent of GDP before the financial markets entirely lose faith in the U.S. economy. Debt as a percentage of GDP above that point is disastrous, whether at 226 percent or 261 percent.

It makes sense, then, for Americans to submit to significant tax hikes only if those increases go to balancing the federal budget, eliminating deficits, and controlling debt. Otherwise, we’re going to pay more for what is essentially the same very bad outcome. A Need for Serious Reform

Benefits of extending the TCJA, on the other hand, operate independent of faith in a sudden surge in responsibility among the political class. Extending the law’s provisions “would boost long-run GDP by 1.1 percent and employment by 913,000 full-time equivalent jobs,” according to the Tax Foundation.

For extending the TCJA, the Tax Foundation considers two options, both including modifications that seek to reduce the hit to federal revenues while maximizing gains for individuals. Option 2, for example, “broadens the individual income tax base by ending the income tax exclusion for employer-provided fringe benefits, most notably health insurance.”

That’s a matter of tweaking the current system around the edges to maintain relief for individuals and a faster-growing economy. Tax Foundation experts also propose possible fundamental changes, including entirely dumping the income tax system in favor of a consumption tax. That has the potential to significantly boost personal income as well as GDP and reduce the national debt. Of course, the gains really apply only if the government also reduces spending.

But such fundamental reform is a lot to ask of a political class that spent us into a corner and now wants tax hikes so there’s even more of our money to spend. Letting the TCJA expire requires placing enormous faith in people who got us into a fiscal mess to begin with.

Fundamental reforms to the federal government’s finances are absolutely necessary. Until that happens, we should resist stealth tax hikes so we can keep our hard-earned money for ourselves.

Politics

Rachel Reeves hints at tax rises in autumn budget after welfare bill U-turn

Published

2 hours ago

July 5, 2025

admin

Rachel Reeves hints at tax rises in autumn budget after welfare bill U-turn

Rachel Reeves has hinted that taxes are likely to be raised this autumn after a major U-turn on the government’s controversial welfare bill.

Sir Keir Starmer’s Universal Credit and Personal Independent Payment Bill passed through the House of Commons on Tuesday after multiple concessions and threats of a major rebellion.

MPs ended up voting for only one part of the plan: a cut to universal credit (UC) sickness benefits for new claimants from £97 a week to £50 from 2026/7.

Initially aimed at saving £5.5bn, it now leaves the government with an estimated £5.5bn black hole – close to breaching Ms Reeves’s fiscal rules set out last year.

In an interview with The Guardian, the chancellor did not rule out tax rises later in the year, saying there were “costs” to watering down the welfare bill.

“I’m not going to [rule out tax rises], because it would be irresponsible for a chancellor to do that,” Ms Reeves told the outlet.

“We took the decisions last year to draw a line under unfunded commitments and economic mismanagement.

“So we’ll never have to do something like that again. But there are costs to what happened.”

Meanwhile, The Times reported that, ahead of the Commons vote on the welfare bill, Ms Reeves told cabinet ministers the decision to offer concessions would mean taxes would have to be raised.

The outlet reported that the chancellor said the tax rises would be smaller than those announced in the 2024 budget, but that she is expected to have to raise tens of billions more.

It comes after Ms Reeves said she was “totally” up to continuing as chancellor after appearing tearful at Prime Minister’s Questions.

Criticising Sir Keir for the U-turns on benefit reform during PMQs, Conservative leader Kemi Badenoch said the chancellor looked “absolutely miserable”, and questioned whether she would remain in post until the next election.

Sir Keir did not explicitly say that she would, and Ms Badenoch interjected to say: “How awful for the chancellor that he couldn’t confirm that she would stay in place.”

In her first comments after the incident, Ms Reeves said she was having a “tough day” before adding: “People saw I was upset, but that was yesterday.

“Today’s a new day and I’m just cracking on with the job.”

Sir Keir also told Sky News’ political editor Beth Rigby on Thursday that he “didn’t appreciate” that Ms Reeves was crying in the Commons.

“In PMQs, it is bang, bang, bang,” he said. “That’s what it was yesterday.

“And therefore, I was probably the last to appreciate anything else going on in the chamber, and that’s just a straightforward human explanation, common sense explanation.”

World

Hamas gives ‘positive’ response to ceasefire proposal but asks for amendments

Published

2 hours ago

July 5, 2025

admin

Hamas gives 'positive' response to ceasefire proposal but asks for amendments

Hamas has said it has “submitted its positive response” to the latest proposal for a ceasefire in Gaza to mediators.

The proposal for a 60-day ceasefire was presented by US President Donald Trump, who has been pushing hard for a deal to end the fighting in Gaza, with Israeli Prime Minister Benjamin Netanyahu set to visit the White House next week to discuss a deal.

Mr Trump said Israel had agreed to his proposed ceasefire terms, and he urged Hamas to accept the deal as well.

Hamas’ “positive” response to the proposal had slightly different wording on three issues around humanitarian aid, the status of the Israeli Defence Forces inside Gaza and the language around guarantees beyond the 60-day ceasefire, a source with knowledge of the negotiations revealed.

But the source told Sky News: “Things are looking good.”

Hamas said it is “fully prepared to immediately enter into a round of negotiations regarding the mechanism for implementing this framework” without elaborating on what needed to be worked out in the proposal’s implementation.

The US said during the ceasefire it would “work with all parties to end the war”.

A Hamas official said on condition of anonymity that the truce could start as early as next week.

But he added that talks were needed first to establish how many Palestinian prisoners would be released in return for each freed Israeli hostage and to specify the amount of humanitarian aid that will be allowed to enter Gaza during the ceasefire.

He said negotiations on a permanent ceasefire and the full withdrawal of Israeli troops from Gaza in return for the release of the remaining hostages would start on the first day of the truce.

Hamas has been seeking guarantees that the 60-day ceasefire would lead to a total end to the nearly 21-month-old war, which caused previous rounds of negotiations to fail as Mr Netanyahu has insisted that Israel would continue fighting in Gaza to ensure the destruction of Hamas.

The Hamas official said that Mr Trump has guaranteed that the ceasefire will extend beyond 60 days if necessary to reach a peace deal, but there is no confirmation from the US of such a guarantee.

Speaking to journalists on Air Force One, Mr Trump welcomed Hamas’s “positive spirit” to the proposal, adding that there could be a ceasefire deal by next week.

Hamas also said it wants more aid to flow through the United Nations and other humanitarian agencies, which comes as the UN human rights officer said it recorded 613 Palestinians killed in Gaza within a month while trying to obtain aid.

Most of them were said to have been killed while trying to reach food distribution points by the controversial US- and Israeli-backed Gaza Humanitarian Foundation (GHF).

The spokeswoman for the UN human rights office, Ravina Shamdasani, said the agency was not able to attribute responsibility for the killings, but added that “it is clear that the Israeli military has shelled and shot at Palestinians trying to reach the distribution points” operated by GHF.

Ms Shamdasani said that of the total tallied, 509 killings were “GHF-related”, meaning at or near its distribution sites.

The GHF accused the UN of taking its casualty figures “directly from the Hamas-controlled Gaza health ministry” and of trying “to falsely smear our effort”, which echoed statements to Sky News by the executive director of GHF, Johnnie Moore.

Mr Moore called the UN figures a “disinformation campaign” that is “meant to shut down our efforts” in the Gaza Strip.

World

Gaza: The man in the room acting as backchannel for Hamas in negotiations with US

Published

2 hours ago

July 5, 2025

admin

Gaza: The man in the room acting as backchannel for Hamas in negotiations with US

Behind the efforts to secure the Gaza ceasefire and hostage release is the remarkable story of one man’s unlikely involvement.

His name is Bishara Bahbah, he’s a Harvard-educated economics professor from Phoenix, Arizona.

In April, his phone rang. It was Hamas.

Since that phone call, Dr Bahbah has been living temporarily in Qatar where he is in direct contact with officials from Hamas. He has emerged as an important back-channel American negotiator. But how?

An inauguration party

I first met Dr Bahbah in January. It was the eve of President Trump’s inauguration and a group of Arab-Americans had thrown a party at a swanky restaurant in Washington DC’s Wharf district.

There was a sense of excitement. Arab-Americans were crediting themselves for having helped Trump over the line in the key swing state of Michigan.

Despite traditionally being aligned with the Democrats, Arab-Americans had abandoned Joe Biden in large numbers because of his handling of the Gaza war.

I’d reported from Michigan weeks earlier and been struck by the overwhelming support for Trump. The vibe essentially was ‘it can’t get any worse – we may as well give Trump a shot’.

Mingling among diplomats from Middle Eastern countries, wealthy business owners and even the president of FIFA, I was introduced to an unassuming man in his late 60s.

We got talking and shared stories of his birthplace and my adopted home for a few years – Jerusalem.

He told me that he still has the deed to his family’s 68 dunum (16 acre) Palestinian orchard.

With nostalgia, he explained how he still had his family’s UN food card which shows their allocated monthly rations from their time living in a refugee camp and in the Jerusalem’s old city.

Dr Bahnah left Jerusalem in 1976. He is now a US citizen but told me Jerusalem would always be home.

He echoed the views I had heard in Michigan, where he had spent many months campaigning as the president of Arab-Americans for Trump.

He dismissed my scepticism that Trump would be any better than Biden for the Palestinians.

We exchanged numbers and agreed to meet for lunch a few weeks later.

A connection with Trump

Dr Bahbah invited two Arab-American friends to our lunch. Over burgers and coke, a block from the White House, we discussed their hopes for Gaza under Trump.

The three men repeated what I had heard on the campaign trail – that things couldn’t get any worse for the Palestinians than they were under Biden.

Trump, they said, would use his pragmatism and transactional nature to create opportunities.

Dr Bahbah displayed to me his own initiative too. He revealed that he got a message to the Palestinian Authority President, Mahmoud Abbas, to suggest he ought to write a personal letter of congratulations to President Trump.

A letter from Ramallah was on the Oval Office desk on 6 November, a day after the election. It’s the sort of gesture Trump notices.

It was clear to me that the campaigning efforts and continued support of these three wealthy men had been recognised by the Trump administration.

They had become close to key figures in Trump’s team – connections that would, in time, pay off.

There were tensions along the way. When Trump announced he would “own Gaza”, Dr Bahbah was disillusioned.

And then came the AI video of Trump and Israeli Prime Minister Benjamin Netanyahu sunning themselves in a Gazan wonderland.

“It is provocative and unacceptable,” he told me just after the president posted the video in February.

Trump must have thought it was funny, so he posted it. He loves anything with his name on it.”

Then came the Trump plan to resettle Palestinians out of Gaza. To this, he released a public statement titled Urgent Press Release.

“Arab-Americans for Trump firmly rejects President Donald J Trump’s suggestion to remove – voluntarily or forcibly – Palestinians in Gaza to Egypt and Jordan,” he said.

He then changed the name of his alliance, dropping Trump. It became Arab-Americans for Peace.

I wondered if the wheels were coming off this unlikely alliance.

Was he realising Trump couldn’t or wouldn’t solve the Palestinian issue? But Dr Bahbah maintained faith in the new president.

“I am worried, but at the same time, Trump might be testing the waters to determine what is acceptable…,” he told me in late February as the war dragged on.

“There is no alternative to the two-state solution.”

He told me that he expected the president and his team to work on the rebuilding of Gaza and work to launch a process that would culminate in the establishment of a Palestinian state, side by side in peace with Israel.

It was, and remains, an expectation at odds with the Trump administration’s official policy.

The phone call

In late April, Dr Bahbah’s phone rang. The man at the other end of the line was Dr Ghazi Hamad, a senior member of Hamas.

Dr Bahbah and Dr Hamad had never met – they did not know each other.

But Hamas had identified Dr Bahbah as the Palestinian-American with the most influence in Trump’s administration.

Dr Hamad suggested that they could work together – to secure the release of all the hostages in return for a permanent ceasefire.

Hamas was already using the Qatari government as a conduit to the Americans but Dr Bahbah represented a second channel through which they hoped they could convince President Trump to increase pressure on Israel.

There is a thread of history which runs through this story. It was the widow of former Palestinian leader Yasser Arafat who passed Dr Bahbah’s number to Dr Hamad.

In the 1990s, Dr Bahbah was part of a Palestinian delegation to the multilateral peace talks.

He became close to Arafat but he had no experience of a negotiation as delicate and intractable as this.

The first step was to build trust. Dr Bahbah contacted Steve Witkoff, Trump’s Middle East envoy.

Witkoff and Bahbah had something in common – one a real-estate mogul, the other an academic, neither had any experience in diplomacy. It represented the perfect manifestation of Trump’s ‘outside the box’ methods.

But Witkoff was sceptical of Dr Bahbah’s proposal at first. Could he really have any success at securing agreement between Israel and Hamas? A gesture to build trust was necessary.

Bahbah claims he told his new Hamas contact that they needed to prove to the Trump administration that they were serious about negotiating.

Within weeks a remarkable moment more than convinced Dr Bahbah and Witkoff that this new Hamas back-channel could be vitally important.

On 12 May, after 584 days in Hamas captivity, Israeli-American Edan Alexander was released.

We were told at the time that his release was a result of a direct deal between Hamas and the US.

Israel was not involved and the deal was described by Hamas as a “good faith” gesture. Dr Bahbah sees it as his deal.

Direct talks took place between Dr Bahbah and five Hamas officials in Doha who would then convey messages back to at least 17 other Hamas leadership figures in both Gaza and Cairo.

Dr Bahbah in turn conveyed Hamas messages back to Witkoff who was not directly involved in the Hamas talks.

A Qatari source told me that Dr Bahbah was “very involved” in the negotiations.

But publicly, the White House has sought to downplay his role, with an official telling Axios in May that “he was involved but tangentially”.

The Israeli government was unaware of his involvement until their own spies discovered the backchannel discussion about the release of Alexander.

Since that April phone call, Dr Bahbah has remained in the Qatari capital, with trips to Cairo, trying to help secure a final agreement.

He is taking no payment from anyone for his work.

As he told me when we first met back in January: “If I can do something to help to end this war and secure a future for the Palestinian people, I will.”