Can Trump's tax cuts be made permanent? Tariffs, spending fights cloud the picture

David Morgan

Thu, May 8, 2025, 3:13 AM 5 min read

By David Morgan

WASHINGTON (Reuters) -Republican hopes of making all of President Donald Trump's 2017 tax cuts permanent are in jeopardy in Congress, as lawmakers struggle to agree on how to pay for them and Trump's trade war and immigration crackdown dim the prospect of economic growth.

With an unofficial deadline for House of Representatives passage of Trump's "one big beautiful bill" barely two weeks away, Republicans are voicing doubts about whether the provisions of the 2017 Tax Cuts and Jobs Act that are set to expire at year-end can be made permanent without ballooning the $36 trillion U.S. debt and $1.9 trillion annual deficit.

Party moderates are pushing back against large-scale cuts to the Medicaid healthcare program that would be necessary to achieve a goal of $2 trillion in offsetting spending cuts over the next decade, while hardliners are demanding that the tax cuts be scaled back if that number can't be met.

"To fully extend and build upon the 2017 tax cuts, this means that the reconciliation bill must include at least $2 trillion in verifiable savings either through spending reductions or scaling back the size of the tax package," 32 House Republican hardliners told party leaders in a letter on Wednesday.

Top Republicans argue the tax cuts will help pay for themselves by generating sustained GDP growth of 2.6% that they say will add $2.5 trillion in new revenue over a decade, helped by Trump's deregulatory moves. Budget analysts call those forecasts overly optimistic, particularly as Trump's trade war and crackdown on immigration -- which will tighten the labor market -- threaten to pinch the economy.

Republican lawmakers argued in 2017 that Trump's tax cuts would pay for themselves by boosting growth, but a review by the nonpartisan Committee for a Responsible Federal Budget found that they added about $1.9 trillion to the national debt.

"We're in a very different circumstance and a very different fiscal environment than we were then," said Jonathan Burks, who was a top aide to Republican former House Speaker Paul Ryan when the Trump tax cuts were enacted eight years ago and now works at the Bipartisan Policy Center. "The capacity of the economy to sort of withstand that level of additional debt is a real question mark."

Burks estimated that Trump's tax cut proposals, which also include exempting tips, overtime and Social Security benefits, could cost as much as $6 trillion over a decade.

House Speaker Mike Johnson, of Louisiana, told reporters this week that making all of the 2017 tax cuts permanent remains "a governing principle."