![]() ![]() Key provisions of the Tax Cuts and Jobs Act that lower taxes for individuals and families are set to automatically expire in 2025, including the expanded Child Tax Credit and the State and Local Tax Deduction. The 2017 Tax Cuts and Jobs Act had disparate effects on state budgets and tax codes, with many states electing to align their tax laws with most or all of the federal tax legislation. Scheduled changes to the tax code will have an impact on the national economy and state policies, but this impact will vary across states and income groups. Tax changes in 2025 are expected to temporarily increase federal revenues and will continue to impact state budgets and tax codes.While these projections are focused on national trends and policies, states will not be immune to the effects of economic changes state policymakers can expect economic uncertainty to impact both federal grants to states and the circumstances around state revenue collection. But until changes are made, federal spending will continue to outpace revenues. The CBO’s analysis makes clear the opportunities and feasibility of reducing the deficit through expenditure and tax-based policies and lays out the growing consequences of inaction. Finally, revenues are projected to spike in 2025 as a result of the expiration of the Tax Cuts and Jobs Act of 2017.Additionally, interest on the deficit will contribute to historically high spending. Increases in spending are driven by mandatory expenditures for programs like Medicare and Social Security, which will gain more dependents and experience higher costs as the U.S. Even as the end of federal pandemic relief programs results in a dip in federal spending, the budget will ultimately rise from 23.5% to 30.2% of the GDP by 2052.As the deficit continues to grow, the national debt will climb from its projected 2022 total of 98% of the GDP to 185% in 2052, nearly doubling in size and reaching a historic high in 2031.Under current fiscal practices, the budget deficit is expected to climb from 2.3% of the GDP to 3.9% at the end of 2052.While states are trying to predict the forecast and how to prepare, all four factors point to stormy weather and rainy days with potential long-term economic difficulties: There are four main projections calculated in the outlook: the deficit, debt, spending and revenues. ![]() The economy remains volatile, showing signs of slowing.Here are three takeaways for state leaders from this year’s report: Regardless of how the federal government approaches the unprecedented conditions predicted, states will have to grapple with changes in funding and fiscal practices to ensure their budgets remain balanced. This year’s report represents a continuation of recent forecasts, predicting a rise in mandatory federal spending on entitlement programs such as Medicare and Medicaid, increased interest costs on the deficit and a historically high debt to GDP ratio. The outlook is used as a tool for policymakers to evaluate the impact of proposed legislation against baseline economic data, such as the gross domestic product (GDP), which measures the total output of the United States economy and provides insight into to economic growth. The Long-Term Budget Outlook is a 30-year projection of different economic factors like government spending and revenues. The Congressional Budget Office released its annual Long-Term Budget Outlook in July.
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