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.

UK

Southport stabbing victim reveals how she survived attack – and fears ‘it could happen again’

Published

1 hour ago

July 29, 2025

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Southport stabbing victim reveals how she survived attack - and fears 'it could happen again'

A girl who was stabbed in the Southport attack has told Sky News how she thought she was going to die that day.

Warning: Some readers may find this content distressing

It is exactly a year since Axel Rudakubana killed three girls and attempted to murder eight others at a summer holiday Taylor Swift-themed dance event in the seaside town.

The girl, who cannot be named for legal reasons, was stabbed in the back and the arm after going to the class with her younger sister.

She is now campaigning for children to have mandatory first aid training at school in response to the growth of knife crime.

She said she clearly remembers what happened that day.

“Some of the girls were sat down in a circle making bracelets with the teachers, and a couple of them were getting up to get beads. I was standing between two tables and he came through the doors.

“He stabbed a little girl in front of me and then came for me and stabbed my arm. I turned and then he stabbed my back, even though I didn’t feel it at the time.

“There was a bunch of girls huddled around so I just started pushing them down the stairs, telling them to get out and run.

“I was thinking ‘Where’s my sister?’ and ‘We need to get out’.”

She and many of the other victims ran to the house of a neighbour for shelter. “I just thought that I was going to die,” she said.

Killer ‘looked possessed’

The girl said she can clearly picture Rudakubana that day.

“What I remember most about him is his eyes. They just didn’t look human, they looked possessed. It was kind of like a dream and you’re on a movie set and watching yourself go through it and make these decisions.

“It’s just kind of like adrenaline. People like to think they know what they’d do in that situation but, in reality, you don’t until you’re in it.”

Six-year-old Bebe King, Elsie Dot Stancombe, who was seven, and nine-year-old Alice da Silva Aguiar died in the attack. It is something she finds difficult to talk about.

“I don’t think I can express how I feel about it,” the girl said. “A lot of anger and sadness.”

In January, Rudakubana was jailed for life and must serve a minimum of 52 years before he can be considered for release.

The chairman of the public inquiry into the atrocity called the attack “one of the most egregious crimes in our country’s history”.

Carrying knives ‘disgusting’

The girl who survived has now launched a campaign, supported by a clothing range called “Go Anywhere, Be Anything” to raise funds, to improve the ability of schoolchildren to help in the event of knife attacks.

“Everyone that’s going out and carrying knives is getting younger and younger,” she said. “And to think that it’s people my age is like disgusting.

“I just want to try and do the best I can to let people know that it’s not okay to do that and that they need to think about what they’re doing and the risks and how they’re harming themselves and other people.”

Her sister, who was also there that day, helped design “Go Anywhere, Be Anything”.

A three-minute silence will be held in Southport at 3pm to mark one year on from the attack. In an open letter to the community, Sefton Council wrote: “This period is incredibly hard for the families of Alice, Bebe and Elsie and all of those children and adults injured or who suffered lifelong psychological impact of witnessing the attack, and we acknowledge the huge impact on their lives, too.

“We must not forget the local people who rushed to support and to our emergency responders. They all remain always in our thoughts.”

It is a sentiment shared by the survivor.

“You live in fear every day that it could happen again,” she said.

“Physically I’m getting better every day and healing. Obviously, my scars stay as a reminder but everyone from that day is going to have mental scars forever.”

UK

Revealed: The scale of cheap Chinese imports flown into UK without paying any tariffs

Published

1 hour ago

July 29, 2025

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Revealed: The scale of cheap Chinese imports flown into UK without paying any tariffs

The scale of cheap Chinese e-commerce imports flown into Britain without paying any tariffs has become clearer following a Sky News investigation into this new multi-billion pound phenomenon.

We have uncovered the first official estimate of the value of so-called “de minimis” imports into Britain, ahead of an official inquiry into whether this legal clause – which excludes packages worth less than £135 from paying customs duties – should be allowed to continue.

Companies like Shein and Temu have become big players in British retail, not to mention elsewhere around the world, by manufacturing cheap products in China and then posting them directly to consumers, benefiting from the de minimis rules.

Clothing manufacturers in the UK claim that de minimis makes it nearly impossible to compete with these Chinese competitors, raising questions about the viability of domestic textile and apparel production.

However, economists argue that the main beneficiaries of the policy to exclude cheap imports from customs are lower-income households, since it allows them to spend less on their shopping. Removing it, they say, would disproportionately affect poorer families.

The government has committed to an inquiry into the rules, which are also being changed in the EU and the US, but up until now there has been no official estimate of its scale.

According to HM Revenue and Customs data released to Sky News following a Freedom of Information request, the total declared trade value of de minimis imports into the UK in the last fiscal year (2024-25) was £5.9bn.

That was a 53% increase on the previous year (£3.9bn), underlining the scale of growth of e-commerce imports into the UK.

While it is hard to gauge how much revenue this means the Treasury has forgone, an illustrative 20% tariff on flows of that order could raise more than £1bn.

While that sum alone would not fill the fiscal black hole faced by Chancellor Rachel Reeves in the coming budget, it would nonetheless be nearly enough to pay for the government’s recent U-turn on winter fuel allowances.

Sky has also obtained the first television access deep into the supply chain, helping bring those goods into the UK, as it boarded a flight that had just travelled from Chongqing to Bournemouth Airport.

We filmed inside the belly of a plane belonging to European Cargo, one of a number of air cargo firms booming as a result of these trade flows.

The untold story about de minimis is that it hasn’t just had an impact on shopping habits in the UK, or for that matter, the textiles manufacturing sector – it has also changed patterns of distribution.

Struggling regional airports that never saw their passenger numbers recover after the pandemic are now re-establishing themselves as hubs for cargo.

European Cargo is now the single biggest airline at Bournemouth Airport, despite not carrying a single passenger.

Other regional airports like East Midlands Airport and Prestwick in Scotland are seeing rapid growth in flows of trade.

All of which raises the stakes for the government’s inquiry into the de minimis system.

At present, there is no timeline for its decision, but removing the clause would have far-reaching effects across the economy.

Technology

Europe sets its sights on multi-billion-euro gigawatt factories as it plays catch-up on AI

Published

2 hours ago

July 29, 2025

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Europe sets its sights on multi-billion-euro gigawatt factories as it plays catch-up on AI

Data storage tapes are stored at the National Energy Research Scientific Computing Center (NERSC) facility at the Lawrence Berkeley National Laboratory, which will house the U.S. supercomputer to be powered by Nvidia’s forthcoming Vera Rubin chips, in Berkeley, California, U.S. May 29, 2025.

Manuel Orbegozo | Reuters

Europe is setting its sights on gigawatt factories in a bid to bolster its lagging artificial intelligence industry and meet the challenges of a rapidly-changing sector.

Buzz around the concept of factories that industrialize manufacturing AI has gained ground in recent months, particularly as Nvidia CEO Jensen Huang stressed the importance of the infrastructure at a June event. Huang hailed a new “industrial revolution” at the GTC conference in Paris, France, and said his firm was working to help countries build revenue-generating AI factories through partnerships in France, Italy and the U.K.

For its part, the European Union describes the factories as a “dynamic ecosystem” that brings together computing power, data and talent to create AI models and applications.

The bloc has long been a laggard behind the U.S. and China in the race to scale up artificial intelligence. With 27 members in the union, the region is slower to act when it comes to agreeing new legislation. Higher energy costs, permitting delays and a grid in dire need of modernization can also hamper developments.

Henna Virkkunen, the European Commission’s executive vice president for tech sovereignty, told CNBC that the bloc’s goal is to bring together high quality data sets, computing capacity and researchers, all in one place.

“We have, for example, 30% more researchers per capita than the U.S. has, focused on AI. Also we have around 7,000 startups [that] are developing AI, but the main obstacle for them is that they have very limited computing capacity. And that’s why we decided that, together with our member states, we are investing in this very crucial infrastructure,” she said.

These are very big investments because they are four times more powerful when it comes to computing capacities than the biggest AI factories.

Henna Virkkunen

European Commission’s executive vice president for tech sovereignty

“We have everything what is needed to be competitive in this sector, but at the same time we want to build up our technological sovereignty and our competitiveness.”

So far, the EU has put up 10 billion euros ($11.8 billion) in funding to set up 13 AI factories and 20 billion euros as a starting point for investment in the gigafactories, marking what it says is the “largest public investment in AI in the world.” The bloc has already received 76 expressions of interest in the gigafactories from 16 member states across 60 sites, Virkkunen said.

The call for interest in gigafactories was “overwhelming,” going far beyond the bloc’s expectations, Virkkunen noted. However, in order for the factories to make a noteworthy addition to Europe’s computing capacity, significantly more investment will be required from the private sector to fund the expensive infrastructure.

‘Intelligence revolution’

The EU describes the facilities as a “one-stop shop” for AI firms. They’re intended to mirror the process carried out in industrial factories, which transform raw materials into goods and services. With an AI factory, raw data goes into the input, and advanced AI products are the expected outcome.

It’s essentially a data center with additional infrastructure related to how the technology will be adopted, according to Andre Kukhnin, equity research analyst at UBS.

“The idea is to create GPU [graphics processing units] capacity, so to basically build data centers with GPUs that can train models and run inference… and then to create an infrastructure that allows you to make this accessible to SMEs and parties that would not be able to just go and build their own,” Kukhnin said.

How the facility will be used is key to its designation as an AI factory, adds Martin Wilkie, research analyst at Citi.

“You’re creating a platform by having these chips that have insane levels of compute capacity,” he said. “And if you’ve attached it to a grid that is able to get the power to actually use them to full capacity, then the world is at your feet. You have this enormous ability to do something, but what the success of it is, will be defined by what you use it for.”

Telecommunications firm Telenor is already exploring possible use cases for such facilities with the launch of its AI factory in Norway in November last year. The company currently has a small cluster of GPUs up and running, as it looks to test the market before scaling up.

Telenor’s Chief Innovation Officer and Head of the AI Factory Kaaren Hilsen and EVP Infrastructure Jannicke Hilland in front of a Nvidia rack at the firm’s AI factory

Telenor

“The journey started with a belief — Nvidia had a belief that every country needs to produce its own intelligence,” Telenor’s Chief Innovation Officer and Head of the AI Factory Kaaren Hilsen told CNBC.

Hilsen stressed that data sovereignty is key. “If you want to use AI to innovate and to make business more efficient, then you’re potentially putting business critical and business sensitive information into these AI models,” she said.

The company is working with BabelSpeak, which Hilsen described as a Norwegian version of ChatGPT. The technology translates sensitive dialogues, such as its pilot with the border police who can’t use public translation services because of security issues.

We’re experiencing an “intelligence revolution” whereby “sovereign AI factories can really help advance society,” Hilsen said.

Billion-euro investments

Virkkunen said the region’s first AI factory will be operational in coming weeks, with one of the biggest projects launching in Munich, Germany in the first days of September. It’s a different story for the gigafactories.

“These are very big investments because they are four times more powerful when it comes to computing capacities than the biggest AI factories, and it means billions in investments. Each of these need three to five billion [euros] in investment,” the commissioner said, adding that the bloc will look to set up a consortium of partners and then officially open a call for investment later this year.

Bertin Martens, senior research fellow at Bruegel, questioned why such investments needed to subsidized by government funds.

“We don’t know yet how much private investment has been proposed as a complement to the taxpayer subsidy, and what capacity and how big these factories are. This is still very much unclear at this stage, so it’s very hard to say how much this will add in terms of computing capacity,” he said.

Power consumption is also a key issue. Martens noted that building an AI gigafactory may take one to two years — but building a power generation of that size requires much more time.

“If you want to build a state-of-the-art gigafactory with hundreds of thousands of Nvidia chips, you have to count on the power consumption of at least one gigawatt for one of those factories. Whether there’s enough space in Europe’s electricity grid in all of these countries to create those factories remains to be seen… this will require major investment in power regeneration capacity,” he told CNBC.

UBS forecasts that the current installed global data center capacity of 85 GW will double due to soaring demand. Based on the EU’s 20-billion-euro investment and the plan for each factory to run 100,000 advanced processors, UBS estimates each factory could be around 100-150 MW with a total capacity for all of the facilities of around 1.5-2 GW.

That could add around 15% to Europe’s total capacity — a sizeable boost, even when compared to the U.S., which currently owns around a third of global capacity, according to the data.

Following the announcement of the EU-U.S. trade framework, EU chief Ursula von der Leyen said Sunday that U.S. AI chips will help power the bloc’s AI gigafactories in a bid to help the States “maintain their technological edge.”

“One could argue that it’s relatively easy, provided you have the money. It’s relatively easy to buy the chips from Nvidia and to create these hardware factories, but to make it run and to make it economically viable is a completely different question,” Martens told CNBC.

He said that the EU will likely have to start at a smaller scale, as the region is unable to immediately build its own frontier models in AI because of their expense.

“I think in time, Europe can gradually build up its infrastructure and its business models around AI to reach that stage, but that will not happen immediately,” Martens said.