The Hidden Math of Extending the Tax Cuts and Jobs Act: Revealing the Numbers

Every tax cut passed in the last five decades has added to the deficits in the United States, but this latest proposal to extend the Tax Cuts and Jobs Act of 2017 (TCJA) is more alarming than any previous tax legislation because we have now passed the historic debt to GDP (Gross Domestic Product) ratio of 120%. Never in the 236 years of U.S. history have we owed so much money to so many creditors—not during the Civil War, not during the Great Depression, not even during World War II—never.

The U.S. now spends over $1 trillion dollars of taxpayer money every year on interest payments alone, sending that hard-earned money to Financial Institutions, China, Japan, India, and many others that have lent us their money, via the purchase of U.S. Treasury Bonds, so that we can keep the lights on in the Pentagon, the Social Security checks flowing to our seniors, the respirators working for our critically ill who are on Medicare, and so on. There is a technology-driven alternative to this misguided extension of the TCJA that could balance the budget and address our deficits; let us examine the numbers.

For many years, politicians have justified tax cuts (and the corresponding loss of tax revenue), by claiming the economy will grow so dynamically that we will collect more tax revenue as a percentage of GDP, asserting the tax cuts will actually collect enough money to balance the budget and pay down on our $36 trillion national debt. The problem is very simple: this has never been true, and it’s not going to suddenly become true in the year 2025 with the extension of the TCJA. Yes, tax cuts can juice an economy and a stock market, but they have never increased the GDP to the point where enough tax revenue is collected that the tax cuts pay for themselves and pay down on the debt.

Very specifically, we can now look back at the last eight years to see exactly how the TCJA has impacted tax revenues since it was first passed. Tax collection as a percentage of GDP is an important number, and for the past 8 years, under the TCJA, the tax system collected an average of 16.8% of GDP (under presidents Trump and Biden). So, based upon the history of the TCJA, and its 16.8% average, we can reliably estimate the tax collection for the next four years, under an extension of the TCJA:

Projected GDP: Projected Total Taxes Collected at 16.8%: 

2025 $30.3 Trillion $5.1 Trillion

2026    $31.5 Trillion $5.3 Trillion

2027    $32.7 Trillion $5.5 Trillion

2028    $34.1 Trillion $5.7 Trillion

(Site:  IMF; Wikipedia)

(Note these numbers are subject to revision in light of Trump’s current Trade War)

We also know how much money the U.S. needs to operate right now. At its most basic level, the Federal Budget (2024) looks like this:

Interest on the National Debt:   $1.2 Trillion

Military Spending:  $1Trillion

Medicare/Medicaid/Affordable Care Health Insurance:  $1.7 Trillion

Social Security:    $1.5 Trillion

All other Operations of the Federal Government

After an Estimation of the Dramatic DOGE Cuts:  $1.5 Trillion

Total Annual Expenditures: $6.9 Trillion 

Based upon the 2028 projected numbers for GDP and estimated tax collections – the treasury will collect $5.7 trillion, and expenditures will be about $6.9 trillion. This means that under the extension of the TCJA, our national debt will grow by at least $1.2 trillion annually, which would add another $4.8 trillion to our debt by 2028, Trump’s last year in office. It’s probably not a coincidence that the “one big, beautiful bill” which includes the extension of the TCJA, also includes a debt ceiling increase of $5 trillion over the next four years, allowing President Trump and Congress to run the national debt up to $41.1 Trillion by 2028, which would be an astonishing 125% of the projected GDP.

The question we face is: how on earth do we break this cycle of debt? The President and the Congress have outlined no plan to balance the budget, let alone pay down the national debt. Spending cuts alone are not the answer—for all the draconian DOGE cuts, Elon Musk’s stated goals are to save $150 billion annually, a tiny fraction of the original prediction, and not a solution to pay down the debt. President Trump’s on again, off again tariffs cannot possibly produce near enough revenue either.

As the numbers show, extending the TCJA is not the answer, as it does not collect enough revenue, and more importantly, it does not fairly share the tax burden. The TCJA will further—and unjustly—place the tax burden onto the salaries and income of middle class and upper middle-class Americans, as all Individuals now contribute about 90% of all tax revenue; while corporations only contribute 10%. American workers simply cannot provide the trillions of dollars needed to balance the budget, especially when only 1% of all corporations contribute the vast majority of the corporate 10%; meaning that 99% of all corporations are not paying taxes. The numbers further reveal that individuals’ contribution of 90% of tax revenue – comes from less than 50% of the economy, while corporations’ only 10% of taxes comes from the other 50%. It was not always this way, for in 1945 individuals and corporations shared the tax burden about 40% each and the U.S. paid down on the debt after WWII.  As revealed in the data, the TCJA continues a dramatically disproportionate tax burden on Individuals and away from corporations and the wealthy; this is neither fair nor effective.

It is now clear that our current tax system, weighed down by tens of thousands of pages of exemptions and special provisions, is not up to the challenges that we’re facing as a Federal Government in the 21st century. So, the real question to answer is how to fairly collect more tax revenue from across the entire economy, no exemptions. Possibilities do exist that could restructure the tax code to correct the inequities and bring fairness and proportionality to the tax system. In my new book, Disrupting Taxes, we examine an Automated Banking Transaction (ABT )Tax that could eliminate the self-declared tax filings of  corporations and individuals and replace them with a very small technology-driven automated banking transaction tax of 1% across the entire economy—an absolutely enormous tax base; estimated in the year 2028 to be around $750 trillion annually – collecting $7.5 trillion; capable of covering expenses and making debt payments.

The ABT Tax would allow us to balance the annual budget, and over a couple decades pay down our national debt. Math and science tell us that the wider the tax base, the lower the tax rate. And proportional application of the tax code, the same tax rate of 1% on all banking transactions, to everyone – individuals and corporations, rich and poor, visitors and criminals, without exemption, is the most proportionate, efficient, and equitable tax system possible. This powerful concept has the potential to level the playing field, pay off the national debt, and restore the American Dream for our children. Something has to change before it’s too late.

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Written by Thomas J. Cryan.
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