CRFB: Extending Trump's tax breaks will have limited effect

President Donald Trump has said that extending tax breaks can significantly accelerate investment and economic growth in the United States. However, a study by the Committee for a Responsible Federal Budget (CRFB) indicates that the effect on the economy will be minimal. 

The main measures relate to taxes on citizens' incomes and tax credits for children, but economists believe that the real incentives for investment are business benefits. In 2017, Trump approved the law on tax benefits for companies, which does not provide for an extension.

The CRFB believes that the abolition of benefits would reduce the fiscal deficit by $3.7 trillion over ten years, reducing government borrowing and stimulating investment. Nevertheless, according to the CRFB, the extension of benefits will not have a significant impact on the economy – these two factors mostly compensate for each other, which leads to minor changes in GDP.

The extension of tax benefits, as alternative models show, may provide a small positive effect, but it will not cover the costs of $4.6 trillion over ten years. Trump proposes to offset these costs by cutting costs and imposing tariffs on imports. In 2024, the US budget deficit reached a record level since the pandemic, amounting to $1.83 trillion.