Failure to extend tax cuts enacted during Trump’s first term will result in the largest tax increase in US history for the middle class, according to Scott Bessent.
Scott Bessent, President-elect Trump’s nominee for Treasury Secretary, warned of an impending US economic crisis by year’s end during his Senate confirmation hearing on Thursday. The former hedge fund manager projected a massive middle-class tax increase within months unless the Tax Cuts and Jobs Act (TCJA) is extended beyond its 2025 expiration date.
The TCJA, signed into law in December 2017, significantly reduced individual and corporate tax rates, nearly doubled the standard deduction, and included a 20% income deduction for small businesses. While corporate tax cuts were made permanent, individual provisions are set to expire at the end of 2025.
“The nation is hurtling toward an economic crisis by year’s end,” Bessent stated to the Senate. He cautioned that the scheduled tax cut expiration would impose “the largest tax increase in history, a staggering $4 trillion tax hike on Americans.”
Bessent lauded Trump’s tax reform, highlighting the positive impact of these cuts on Americans before the COVID-19 pandemic disrupted their full implementation, describing them as “highly successful.”
Bessent emphasized that without the renewal and extension of these tax cuts, the US “will face a major economic catastrophe,” with the middle class disproportionately affected.
“We will witness a substantial tax increase for the middle class, a halving of the child tax credit and deductions, potentially leading to what economists term a ‘sudden stop’,” he warned, referring to a sharp decline in capital flows often triggering recessions and market corrections.
Bessent’s remarks contribute to the ongoing debate surrounding US fiscal policy. While Republicans advocate for extending the tax cuts to bolster economic growth, critics contend that the TCJA unfairly benefited higher-income individuals and exacerbated the national deficit.
Bessent’s assertions directly contradict those of outgoing Treasury Secretary Janet Yellen. Addressing the New York Association for Business Economics on Wednesday, Yellen cautioned that extending the 2017 tax cuts in full would “worsen projected deficits” by approximately $4 trillion through 2034. She criticized calls for extending the cuts as “flawed economic policy,” warning that such actions “could jeopardize the nation’s strength, from the stability of the Treasury market to the value of the dollar, potentially even triggering a future debt crisis.”