The USA presidential candidate Trump stated that extending the tax cut policy would stimulate investment and promote economic growth in the USA - this promise helped him win in the elections in November.

However, the latest analysis from the nonpartisan fiscal oversight organization, the Committee for a Responsible Federal Budget (CRFB), warns that extending the tax cuts set to expire next year will provide little help for economic growth. This is a troubling data point for Republicans. Republicans present the extension of this costly legislation as a way to boost the economy, while many voters say that this legislation has not served them.

Most of the upcoming updated measures largely benefit individuals and families, including lowering income tax rates and expanding the child tax credit. While these measures are easily accepted by voters, economists are cautious about the scale of the economic benefits they will bring.

The business tax cuts signed during Trump's first term will not be renewed, although he promised donors and business leaders gathered at the New York Stock Exchange on Thursday that he would reduce the corporate tax to 15%. However, this promise is seen as a potentially dangerous move, as both voters and some Republicans scorn further aid to large corporations.

The findings of the CRFB are based on an assessment by the Congressional Budget Office, which previously examined the consequences of not extending the tax cuts. This nonpartisan organization found that allowing the tax cuts to expire would significantly increase public revenue, reducing the cumulative fiscal deficit by $3.7 trillion over ten years.

These potential revenue increases would mean less public borrowing, thereby stimulating private investment. In the Congressional Budget Office's analysis, this would help offset the labor decline caused by the expiration of the tax cuts. The Congressional Budget Office stated: "Overall, these two effects largely offset each other, resulting in very little change in GDP."

This means that, in the view of the CRFB, extending the tax cut policy would have a similar and modest net effect on economic growth.

Other models, including budget models from the Tax Foundation and Wharton School of Business, show a slight positive economic feedback from extending the tax cuts, but it is far from enough to cover the cost of extending the cuts.

Trump bragged that the "Government Efficiency Office" would drastically cut spending, which is a nonprofit organization managed by Musk and entrepreneur Vivek Ramaswamy, aimed at proposing significant savings in public spending. Additionally, Trump mentioned imposing a 10% to 20% tariff on all imported Commodities as an offset for the tax cuts.

Extending the tax cuts is just part of Trump's financial agenda, which also includes plans for comprehensive cuts to Other taxes, such as those on tips and overtime pay, as well as lowering corporate taxes.

Investors are closely monitoring for any signs of fiscal pressure. Although Wall Street economists state that extending tax cuts would benefit economic growth, they warn that other factors are also at play.

Stephen Jen, CEO of Eurizon SLJ Capital, stated: "For Trump 2.0 and Congress, supplementing tax cuts with spending cuts will be crucial. It's not just about tax cuts; it's about streamlining government, which means reducing spending."

David Seif, chief economist for Developed Markets at Nomura Securities, said that this means, given the constantly deteriorating fiscal outlook, the space for further tax cuts has diminished.

Editor/lambor