The middle class will face the largest tax hike in history unless cuts made during Trump’s first term are extended, Scott Bessent has said.
The US is headed towards an economic crisis by year’s end, Scott Bessent, US President-elect Donald Trump’s pick for Treasury secretary, has warned. During his Senate confirmation hearing on Thursday, the former hedge fund manager predicted that the country would face a “gigantic” middle class tax increase in a few months unless it extends the Tax Cuts and Jobs Act (TCJA), which is set to expire at the end of 2025.
The TCJA was a major tax reform law signed by Trump during his first term in office in December 2017. It reduced individual and corporate tax rates, nearly doubled the standard deduction, and introduced 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.
“Americans are barreling towards an economic crisis at year’s end,” Bessent told the Senate. He warned that if the tax cuts expire as scheduled at the end of the year, “Americans will face the largest tax increase in history, a crushing 4 trillion tax hike.”
Bessent praised Trump’s tax reform, noting that Americans “saw the power of these cuts” before the Covid-19 pandemic broke out and interrupted their implementation, and that they were “a great success.”
Bessent added that unless the tax cuts are “renewed and extended,” the US “will be facing an economic calamity,” with the middle-class likely bearing the brunt of the fallout.
“We will see a gigantic middle class tax increase, we will see the child tax credit halved, we will see the deductions halved, so it will be – what we call in economics – it has the potential for what we call a sudden stop,” he warned, referring to a term characterized by an abrupt reduction of capital flows into a nation’s economy, which is often accompanied by economic recessions and market corrections.
Bessent’s remarks come amid a broader debate over US fiscal policy. While Republicans have been advocating for extending the tax cuts to sustain economic growth, critics argue that the TCJA disproportionately benefited higher-income individuals and contributed to the national deficit.
Bessent’s comments sharply contrast with remarks made earlier this week by outgoing Treasury Secretary Janet Yellen. At the New York Association for Business Economics on Wednesday, Yellen warned that policies including a full extension of the 2017 cuts could “exacerbate projected deficits” by around $4 trillion through 2034. She slammed calls for extending the cuts as “misguided economic policymaking,” and warned they “could undermine our country’s strength, from the resilience of the Treasury market to the value of the dollar, even provoking a debt crisis in the future.”
