The 2017 Tax Cuts and Jobs Act: Revenue and Distributional Effects

The Tax Cuts and Jobs Act of 2017 temporarily reduced individual income tax rates, nearly doubled the standard deduction, capped SALT deductions at $10,000, and cut the corporate rate from 35% to 21%. Most individual provisions expire after 2025. CBO estimates that a full TCJA extension costs approximately $4.6 trillion over 10 years (2026-2035). Your task is to verify this by scoring the TCJA extension in the model and entering the 10-year deficit increase. Use the slider to set the rate_change parameter that approximates the full individual rate cut (approximately −3.7pp average effective rate cut).

TCJA capped state and local tax (SALT) deductions at $10,000, affecting high-tax-state residents (CA, NY, NJ) most heavily. CBO estimates removing the SALT cap would cost an additional $1.9 trillion over 10 years. Compare two scenarios: A) TCJA extension WITH the $10K SALT cap (baseline) B) TCJA extension WITHOUT the SALT cap (restore full deductibility) The difference in 10-year cost between (B) and (A) represents the revenue cost of removing the SALT cap. Estimate this difference.