A large number of Americans could be in line for a tax break if former President Donald Trump takes back the White House – and also the potential bill to pay for those cuts.
In recent months, Trump has floated several tax cuts for various groups, including senior citizens, tipped workerspeople get it overtime and, most recently, homeowners in high-tax states. The latest proposal, announced on Tuesday during the campaign in New York, will reverse the deduction cap of $10,000 on state and local taxes (SALT) signed into law under the Taxes & Jobs Act of 2017 (TCJA).
The cost of paying the bill for Trump’s tax proposal is increasing, especially since it will complete a plan to extend the tax cuts in the TCJA, which expires in 2025, as well as reduce the corporate tax rate to 15% from the current rate of 21%. To offset these costs with other sources of federal revenue, Trump has indicated plans to impose new tariffs on all imports into the US.
Tariffs are “the best word,” Trump said in a Sept. 14 interview with ABC 13 Las Vegas. He said the state’s deficit would be reduced “to a manageable amount” through tariffs. He added, “Ultimately, we can break it down, and it will generate tremendous growth.”
Those tariffs won’t come close to covering the bill for Trump’s long list of tax cuts, policy experts say. Trump’s proposed tax breaks together could cost as much as $9 trillion over the next decade, according to a Sept. 20 analysis from TD Cowen analyst Jaret Seiberg.
Trump’s proposed tariffs would raise $2.8 trillion over the same period, the Tax Policy Center forecasts.
“The strategy seems to me to look at a location and promise to cut taxes based on what people in that location want,” said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, a think tank that advocates for lower federal deficits. told CBS MoneyWatch about Trump’s proposal. “It’s just weekly or daily, and the cost is increasing.”
He added, “Tariffs cannot cover this entire agenda.”
The Trump campaign did not immediately respond to a request for comment.
Harris tax plan and deficit impact
Of course, Vice President Kamala Harris also promised a slew of tax breaks, aimed at helping everyone from new parents to first-time homebuyers. His campaign proposed raising incomes by increasing the corporate tax rate to 28% from the current 21%, and repealing the tax cuts in the TCJA for high earners.
His plan would cause the deficit to rise by about $1.2 trillion over the next decade, compared to $5.8 trillion for Trump’s proposal, according to estimates from the Penn Wharton Budget Model created before Trump’s SALT proposal. The Penn Wharton Budget Model is a group at the University of Pennsylvania’s Wharton School that analyzes the budgetary impact of government policies.
If Trump also removes the cap on the SALT deduction, he plans to increase the deficit by $6.9 trillion over the next decade, Kent Smetters, faculty director of Penn Wharton’s Budget Models, told CBS MoneyWatch on Friday.
Both presidential campaigns have been attacked by tax experts and fiscal hawks for potentially increasing the deficit, which is expected to reach $1.9 trillion in fiscal year 2024, according to a Congressional Budget Office forecast in June. This represents a 27% increase from the agency’s previous February forecast, due in part to new US funding provided to Ukraine, Israel and other countries.
“It seems that the two candidates are likely to be red,” said Goldwein of the Committee for a Responsible Federal Budget.
Trump’s tax cuts — and costs
One of the biggest costs in Trump’s tax proposals will stem from extending the TCJA tax cuts beyond 2025, noted TD Cowen’s Seiberg. Beyond the tax break, which is mainly benefiting from high-income Americanswill cost $ 4.5 trillion over the next 10 years, assuming the cap of the SALT deduction remains unchanged at $ 10,000, which is approximately.
Here’s how Seiberg estimates Trump’s new tax cut proposals will increase those costs:
- Eliminate income taxes on Social Security benefits: $1.6 trillion
- Tax cuts to pay overtime: $1.1 trillion over 10 years
- Restore the full SALT cut: $1 trillion over a decade
- Lowering the corporate tax rate: $673 billion
- Remove the tax on tipped wages: $250 billion
“This could mean that Trump’s tax reform agenda will cost about $9 trillion over 10 years,” Seiberg said. “We see this as a tough sell on Capitol Hill and into the market.”
Of course, Trump and Harris will have to get a tax proposal passed by Congress to overwrite the existing tax code, a high bar depending on which party controls the House or Senate during the next presidential term. In the meantime, Trump’s proposal could appeal to many taxpayers.
“Trump is far from the first candidate to promise a chicken in every pot,” Seiberg added. “It doesn’t mean they’re going to keep their promises.”
