Brace for Big Tax Hikes in 2026 Unless Congress Acts

Published

1 year ago

May 14, 2024

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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.

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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

How is Starmer’s government doing? Here’s what ‘end-of-term’ report from voters says

Published

45 mins ago

July 30, 2025

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How is Starmer's government doing? Here's what 'end-of-term' report from voters says

One year on, how’s Keir Starmer’s government going? We’ve put together an end-of-term report with the help of pollster YouGov.

First, here are the government’s approval ratings – drifting downwards.

It didn’t start particularly high. There has never been a honeymoon.

But here is the big change. Last year’s Labour voters now disapprove of their own government. That wasn’t true at the start – but is now.

And remember, it’s easier to keep your existing voter coalition together than to get new ones from elsewhere.

So we have looked at where voters who backed Labour last year have gone now.

YouGov’s last mega poll shows half of Labour voters last year – 51% – say they would vote for them again if an election was held tomorrow.

Around one in five (19%) say they don’t know who they’d vote for – or wouldn’t vote.

But Labour are also leaking votes to the Lib Dems, Greens and Reform.

These are the main reasons why.

A sense that Labour haven’t delivered on their promises is top – just above the cost of living. Some 22% say they’ve been too right-wing, with a similar number saying Labour have “made no difference”. Immigration and public services are also up there.

Now, YouGov asked people whether they think the cabinet is doing a good or a bad job, and combined the two figures together to get a net score.

John Healey and Bridget Phillipson are on top, but the big beats of Angela Rayner, Keir Starmer and Rachel Reeves bottom.

But it’s not over for Labour.

Here’s one scenario – 2024 Labour voters say they would much prefer a Labour-led government over a Conservative one.

But what about a Reform UK-led government? Well, Labour polls even better against them – just 11% of people who voted Labour in 2024 want to see them enter Number 10.

Signs of hope for Keir Starmer. But as Labour MPs head off for their summer holidays, few of their voters would give this government an A*.

Politics

Starmer’s plan to recognise Palestinian state labelled ‘appeasement towards jihadist terrorists’ by Netanyahu

Published

45 mins ago

July 30, 2025

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Starmer's plan to recognise Palestinian state labelled 'appeasement towards jihadist terrorists' by Netanyahu

Sir Keir Starmer’s plan to recognise Palestine as a state has been attacked as “appeasement towards jihadist terrorists” by Israeli Prime Minister Benjamin Netanyahu.

The prime minister said the UK will recognise a Palestinian state by September unless Israel takes “substantive steps” to end the situation in Gaza, Israel agrees to a ceasefire, commits to a long-term sustainable peace, allows the UN to restart aid supplies and does not annexe the West Bank.

About 250 MPs from all parties – half of them Labour – had signed a letter last week calling for Sir Keir to immediately recognise a Palestinian state.

Politics latest: PM’s Palestine plan labelled ‘absurd’

Sir Keir said that by giving Israel a deadline of 9 September UN meeting, he hoped this would play a part “in changing the conditions on the ground, and making sure aid gets into making sure that there is hope of a two-state solution for the future”.

But Mr Netanyahu condemned the plan, saying Sir Keir “rewards Hamas’s monstrous terrorism and punishes its victims”.

“A jihadist state on Israel’s border today will threaten Britain tomorrow,” he wrote on X.

“Appeasement towards jihadist terrorists always fails. It will fail you too. It will not happen.”

The Israelis also accused Sir Keir of pandering to his MPs and France, after Emmanuel Macron committed to recognising a Palestinian state last week, and harming efforts to release Israeli hostages.

Lib Dems and Greens: ‘Bargaining chip’

Sir Keir also faced accusations of using Palestinian state recognition as a “bargaining chip” by both the Lib Dems and the Green Party.

Lib Dem leader Sir Ed Davey said a Palestinian state should have been recognised “months ago” and “far greater action” is needed to stop the humanitarian disaster in Gaza.

Green Party foreign affairs spokesperson Ellie Chowns, who wants immediate state recognition, said it was a “cynical political gesture”.

Humza Yousaf, Scotland’s former SNP first minister, who revealed a family member was killed in Gaza days ago, told Sky News statehood “shouldn’t be dependent” upon the conditions Sir Keir has set for Israel, but is the “inalienable right” of the Palestinian people.

The British Palestinian Committee, representing Palestinian interests in the UK, described conditions as “absurd and performative”.

UK Jewish groups seek clarity

The Board of Deputies of British Jews, the UK’s largest Jewish organisation, said it was “seeking urgent clarification” that the UK will not recognise Palestine as a state if Israeli hostages remain in Hamas captivity, or if Hamas keeps rejecting a ceasefire deal.

The Labour Friends of Israel group said it has “shared goals” with the government but state recognition “will be a merely symbolic act unless the UK uses its influence to establish the principles of a meaningful pathway to a Palestinian state”.

Sarah Champion, Labour MP and chair of the international development committee, who started the MP letter calling for state recognition, said she was “delighted and relieved”.

However, she added: “I’m troubled our recognition appears conditional on Israel’s actions.”

When Foreign Secretary David Lammy announced the plan at a UN meeting, he received applause.

Not many other Labour MPs commented.

Tories accuse Starmer of appeasing MPs

Conservative leader Kemi Badenoch accused Sir Keir of being more focused on a “political problem for the Labour Party” than other issues facing the UK.

“Recognising a Palestinian state won’t bring the hostages home, won’t end the war and won’t get aid into Gaza,” she posted on X.

“This is political posturing at its very worst.”

Tory shadow foreign secretary Priti Patel said the announcement was “to appease his backbenchers” as “he knows that promises to recognise Palestine will not secure lasting peace”.

Trump did not discuss statehood with Starmer

Donald Trump said he and Sir Keir “never did discuss” the PM’s plan to recognise a Palestinian state during their meetings in Scotland the day before.

However, Tammy Bruce, spokeswoman for the US state department, said Sir Keir’s plan is a “slap in the face for the victims of October 7”, which “rewards Hamas”, the Telegraph reported.

Politics

Gary Neville hits out at national insurance rise – and makes prediction for Manchester United’s season

Published

45 mins ago

July 30, 2025

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Gary Neville hits out at national insurance rise - and makes prediction for Manchester United's season

Gary Neville has criticised the government’s national insurance (NI) rise this year, saying it could deter companies from employing people and “probably could have been held back”.

The former Manchester United and England footballer-turned business owner, who vocally supported Labour at the last election, employs hundreds of people.

But he expressed his frustration at the recent hike on employers’ NI, which has significantly increased the taxes businesses have to pay for their employees.

Speaking to Sky News’ Business Live, Neville said: “I honestly don’t believe that, to be fair, companies and small businesses should be deterred from employing people. So, I think the national insurance rise was one that I feel probably could have been held back, particularly in terms of the way in which the economy was.”

While the Sky Sports pundit thought the minimum wage increase introduced at the same time was necessary to ensure that people are paid a fair wage and looked after, he made it clear the double whammy for businesses at the start of April would be a challenge for many companies big and small.

“I mean look it’s been a tough economy now for a good few years and I did think that once there was a change of government, and once there was some stability, that we would get something settling,” he said. “But it’s not settling locally in our country, but it is not settling actually, to be fair, in many places in the world either.

“I don’t think we can ever criticise the government for increasing the minimum wage. I honestly believe that people, to be fair, should be paid more so I don’t think that’s something that you can be critical of. I do think that the national insurance rise, though, was a challenge.”

Neville’s business interests are diverse, spanning property development, hospitality, media, and sports.

He co-founded GG Hospitality, which owns Hotel Football and the Stock Exchange Hotel, and is involved in Relentless Developments, focusing on building projects in the North West. He is also a co-founder of Buzz 16, a production company, and a partner in The Consello Group, a financial services company.

The tax increase is expected to raise £25bn for the Treasury, with employers having to pay NI at 15% on salaries above £5,000, and up to 13.8% on salaries above £9,100.

The rise has already led the Bank of England to warn that it is contributing to a job market slowdown.

Governor Andrew Bailey warned last month that “the labour market has been very tight in the past few years, but we are now seeing signs that conditions are easing, employment growth is subdued, and several indicators of labour demand and hiring intentions have softened”.

The government has defended the tax increase, announced by Rachel Reeves in last year’s budget and implemented in April, arguing that the money was needed to pay for public services like the NHS to help bring down waiting lists.

‘Can’t get any worse’ for Man Utd

Neville conceded that turning beleaguered football club Manchester United around could prove more difficult than trying to bring about substantial economic growth.

The side finished 15th last season – its worst performance in the history of the Premier League.

“Yeah, that could be a bigger challenge than the economy… I think the two signings are good signings yet, there’s a couple more needed,” Neville said of his former club’s fortunes.

“I think they need a goalkeeper. And I think if they fill those two positions with decent signings, then United can have a lot, I mean, they have to have a better season than last year. It can’t get any worse, really.”