Two high-profile economists examined how President Donald Trump’s tax law continues to shape growth, jobs, and federal finances, offering a measured read on what it means for businesses and households. Piper Sandler senior economist Jake Oubina and FHN Financial chief economist Chris Low discussed the policy’s effects and its next phase during a recent appearance on the program “Making Money.” Their remarks come as Congress faces key choices ahead of 2025, when many individual tax provisions are set to end.
The conversation centered on who benefited most from the 2017 law, how it influenced investment and hiring, and what rising deficits and interest rates may mean for the economy. The timing matters. Lawmakers are debating whether to extend major parts of the law while the Federal Reserve navigates inflation, slower growth, and tighter credit.
What the Law Changed
The Tax Cuts and Jobs Act (TCJA) passed in late 2017. It lowered the corporate income tax rate to 21% from 35% and reduced individual income tax rates for many filers. It also capped the state and local tax (SALT) deduction at $10,000 and expanded the child tax credit. Most corporate changes were permanent, while many individual provisions are set to expire after 2025.
- Corporate tax rate cut to 21%.
- Temporary individual rate reductions through 2025.
- $10,000 cap on SALT deduction.
- Expanded child tax credit and higher standard deduction.
Supporters argued the changes would spur capital spending and raise wages. Critics warned of larger deficits and uneven gains. Both points remain central to the discussion today.
Growth, Jobs, and Business Investment
Economic growth accelerated in 2018, with real GDP rising around 2.9%, helped by stronger business spending and consumer demand. Hiring stayed firm, and the jobless rate fell to near 50-year lows in 2019. Oubina and Low noted that many firms used lower tax bills to increase buybacks and dividends, but capital spending also rose in the first phase of the law’s rollout.
Several studies found that the investment boost faded in later years as trade tensions, supply shocks, and then the pandemic hit. Wage gains were steady, though hard to tie to one policy. Economists point to tight labor markets and state-level minimum wage increases as other drivers. The panelists emphasized that separating the law’s direct effects from other forces is difficult, yet the immediate post-2017 period showed a lift in activity.
Deficits, Interest Rates, and Inflation Pressures
The TCJA widened federal deficits. The Congressional Budget Office estimated that the law added roughly $1.5 trillion to deficits over a decade, even after accounting for stronger growth. That debt burden is now colliding with higher interest rates, raising the federal interest bill. Low highlighted the risk that higher borrowing costs leave less room for other spending in the years ahead.
Inflation surged in 2021 and 2022 due to pandemic shocks, supply chain strains, and fiscal support during the crisis, not the 2017 tax law. Still, larger deficits can add heat to the economy at the margins. With the Fed holding rates high to contain prices, the fiscal outlook is under closer scrutiny.
Winners, Losers, and Regional Effects
The SALT cap hit high-tax states hardest, while the corporate rate cut helped large multinationals and profitable firms. Pass-through businesses benefited from a separate deduction that is also set to sunset. For many middle-income households, lower rates and a bigger standard deduction offset the SALT cap, though the effects varied by income, family size, and location.
Oubina and Low agreed that the law’s distribution was uneven. They differed on how durable the growth lift was and how much weight to place on fiscal costs versus investment gains. That split mirrors wider debates among policymakers and researchers.
What Happens in 2025
Most individual tax cuts expire after 2025. Congress will decide whether to extend, modify, or let them end. The choices could reshape take-home pay, business planning, and the deficit path. Markets will watch for clarity on the SALT cap, individual brackets, the child tax credit, and the pass-through deduction.
Businesses are already modeling scenarios. A temporary extension would keep current rates but extend fiscal pressures. A partial extension could target middle-income relief while trimming high-end benefits. A broader rewrite could revisit the corporate rate and investment incentives in light of global tax changes.
What to Watch Next
Three signals stand out as lawmakers approach the 2025 deadline:
- Budget math: How Congress balances tax changes with deficit concerns.
- Investment trends: Whether capex and hiring plans pick up on policy clarity.
- Rates and growth: The Fed’s path and how higher interest costs shape fiscal choices.
The discussion pointed to a familiar trade-off. Lower taxes can support growth, but they must be weighed against long-run debt. With key provisions set to lapse, the next round of decisions will test how Washington manages both goals at once.
For households and firms, the practical advice is simple. Track the 2025 debate, assess exposure to expiring provisions, and prepare for multiple outcomes. The next move on tax policy could set the tone for the economy through the second half of the decade.
