The Republican tax break plan would give many Americans more money, but most cuts would end in early 2029

 Many lawmakers seek Medicaid cuts to pay for
the new tax legislation. (Adobe Stock photo)

The tax break plan currently being crafted by Republicans on Capitol Hill would put more cash in the hands of many Americans, but the strategy comes with a catch: Many of the cuts will end when President Trump's second term comes to a close. "Almost all of the cuts that Republicans hope to pass in the coming weeks will last only until President Trump is set to leave office," reports Andrew Duehren of The New York Times.

Despite the short-term gains, many Americans may see the cuts as a hard-earned respite from years of post-pandemic inflation. They include "a $500 increase to the child tax credit and a $1,000 bonus to the standard deduction, as well as Trump’s pledges to not tax tips or overtime pay," Duehren writes. "The effect would be to shower many Americans with hundreds of dollars per year, starting when they file taxes next year, a windfall that would dry up as Mr. Trump leaves office."

Not every tax break will be time-limited. "Much of the legislation is focused on preserving the architecture of the last Republican tax cut, passed during Trump’s first term," explains Duehren. For instance, the lower income rates for individual filers and the larger standard deduction would remain intact.

Tax policy experts do not see the new cuts substantially impacting the U.S. economy. Duehren reports, "The Tax Foundation, a think tank that is generally bullish on tax cuts’ ability to spur economic growth, estimated this week that the bill would increase gross domestic product by 0.6% in the long term."

Part of the money needed to pay for the tax cuts will come from Medicaid cuts. "More than eight million low-income Americans could lose their health insurance as a result of the Medicaid cuts that the G.O.P. has drafted," Duehren adds. "All while the biggest benefits of the tax cuts would flow to high-income Americans who owe the most in income tax . . . ."