The 2017 Tax Cuts and Jobs Act (TCJA) introduced a tax deduction of 20% of qualified business income (QBI) for pass-through businesses. This provision is set to expire at the end of 2025, but Republican lawmakers have proposed both extending it and increasing the deduction to 23%. This brief describes IMPA’s evaluation of the proposal. It finds that, in contrast to what supporters of the
provision claim, extending and increasing the deduction would be mildly contractionary. The proposals would decrease federal government revenue significantly and would increase inequality.
