Many people celebrated the 2017 Tax Cuts and Jobs Acts (TCJA), which cut taxes for both individuals and businesses, as great for their pocketbooks and their propensity to invest. Unfortunately, many of these people may be unaware that not all of the TCJA is permanent; part of it is subject to a sunset clause and will end in 2025. With months counting down until this sunset clause kicks in, business organizations are starting to mobilize to encourage Congress and the Biden administration to act. The National Association of Manufacturers (NAM) is beginning a lobbying campaign to urge both the legislative and executive branches to make the 2017 TCJA permanent.
This lobbying campaign, titled Manufacturing Wins, has surveyed American businesses and found that a strong majority of them believe that losing the 2017 tax cuts will reduce their ability to hire and invest in new capital goods like equipment and machinery. Additionally, NAM argues that American manufacturers have upheld their end of the tax cut bargain by hiring more workers. This is evidenced by the United States’ extremely low unemployment rate, which has held for multiple years.
Tax Cut Expiration Highlights “Sunset Provisions” in Laws
The “sunsetting” of part of the 2017 TCJA is an important reminder to Americans that some federal laws actually expire and need to be periodically renewed to remain in effect. This action has been policy since the 1970s to avoid redundant and outdated legislation. One famous law known to many Americans that sunsetted, or expired, was the 1994 Assault Weapons Ban, which expired in 2004. However, a majority of states also have sunset laws, including those governing agencies and their duties. This is intended to prevent state government agencies from constantly expanding or continuing to exist after their duties have largely become unnecessary.
Therefore, supporters of legislation must be aware that the law may not be permanent. Thus, lobbying efforts are necessary over the long term. Fortunately, this is one reason that business and trade organizations like the National Association of Manufacturing exist—these groups pay attention to laws, rules, and regulations and lobby in favor of their members.
Making Tax Cuts Permanent Could Encourage Long-Term Growth
Domestic manufacturers need money to invest in talented employees and new capital goods. As part of supply-side economics, tax cuts help achieve these two needs. Of course, nobody wants taxes to increase, but many are concerned that making the 2017 TCJA permanent will significantly increase the national debt. By cutting taxes while maintaining government spending, the TCJA has increased the annual federal deficit and added to the national debt. However, there are other options to increase tax revenue than simply letting TCJA expire.
Congress could keep TCJA and raise taxes in areas other than manufacturing and small business, thereby not threatening the productivity of domestic firms. For example, increased taxes on imports (tariffs), luxury goods, products like alcohol and tobacco (sin taxes), and marginal levels of non-business income could bring in revenue and allow taxes on manufacturers to remain low. Hopefully, NAM will successfully lobby Congress and the Biden administration to keep TCJA and adjust the tax code in other areas to stay sufficient revenue and not destabilize the national debt.
