March 14, 2025
Actually, Donald Trump has a 2024 Campaign Tax plan, but the benefits from it along with the fallout does not make any sense. He floated around several tax policy ideas, but he wanted to extend the expiring 2017 Tax Cuts and Jobs Act (TCJA) changes. The tax cuts he gave the rich in 2017 ballooned the Federal Deficit by billions. Now he wants to do it again. But how he plans to do it will be nearly impossible and to say he will balance the budget in his second term, he surely must have another plan to accomplish his goals. At least I hope so, because he’s not going to get anywhere on this in short order and especially not with just tariffs and his campaign tax plan.
But the impact of his proposals will be very different if implemented, depending on which policies he puts forward and how he structures them.
I believe that some of his proposals are designed in a way that would promote long-run economic growth. But what is it going to be for Americans in the short term. PURE HELL! There is no other way to say it. People have to survive the short term in order to benefit from future economic growth. By then, we will all be living under a bridge somewhere.
He’s mentioned there should be permanent expensing for equipment, machinery and research and development (R&D). That’s reasonable, but does he have the smarts to get that done in his second term? I can’t see him accomplishing anything that would help the middle class.
Case in point, some of his tax proposals would worsen the structure of the tax code and are poorly designed. They wouldn’t contribute as much to long-run economic growth.
Unfortunately, I’m talking about Social Security income and ‘no tax on tips’. For me, it would be wonderful not to have to pay income tax on my social security, just because my wife’s income combined with my social security is above $32,000. I pay approximately $3,500 a year in taxes on my social security. So I have to save at least 10% of my social security check to pay taxes on that money that I already earned while working and paying taxes on the money I took home. In the past, I didn’t pull money out of my monthly social security check, but now I am doing just that. I filed ‘A Voluntary Withholding Request’ tax form, known as FORM W-4V. Saving that money each year to make sure I pay enough taxes by the end of the year is a good thing, but that’s money that I could have deposited in a savings account with interest, But then what about exemptions for tips? Sure, that would make restaurant servers happy to be able to keep all their hard earned time money, but presently since it is income that they make while working for the company that employs them, they must pay taxes. Even if they didn’t have to pay a tax on their hard earned tips, there would be very little or no long-run economic growth. That’s kind of right to say that the employee getting the tips wouldn’t even get them if the employer didn’t hire them. So maybe the employer should get part of the tip.
Worse than any of this just mentioned, Trump’s reliance on import tariffs to offset the cost of tax cuts for the rich is a particularly distortive way to raise revenue, especially when all this seems to do is raise the ire of the tariffed countries he is attacking. Does Trump tell the American people that he’s putting us through hell with his tariffs to help his rich friends get another tax cut? Of course not!
But let’s get to the nuts and bolts of the issue here. I believe that his tariffs and his retaliation from his trading partners would totally null the long-run economic benefit that he’s proposed in his tax cuts. All for what? All for the ‘PAIN’ that people have to bear because Trump wants to play God-Almighty with the world. He wants all countries to bow to him, and he’s finding out in a short period of time that they will not bow to him and have other means to trade with partners that can be fair and not charge retaliatory tariffs just because they think they are being over-taxed. When it comes to trade between countries, keeping business private and discuss trading issues between specific countries is done best by the countries in a personal setting, not open for the whole world to see. If Trump is ignorant enough to embarrass a country in front of the world regard trade practices and institutes tariffs to solve the problem, the country being attacked has that same right. Countries like Canada, Mexico and China are not afraid of Trump and they can cause Trump just as much pain if not more that Trump can. Unfortunately, we are going to have to feel that pain. Trump claims that will be for a short period of time. I believe that it will be long term.
What he is actually doing or is trying to do with his tariffs is to offset the economic benefits of the policy changes he’s pushing forward to begin with, and his tax policies will not move in a positive direction for pro-growth, and fiscally responsible tax reform.
Again, Trump has a campaign tax plan, but never fully thought out what results he could actually gain from going forward with such a tax plan.
So in the following outline is the modeling for proposed major provisions by Donald Trump.
- Making the individual TCJA expirations permanent except for the cap on SALT (effective January 1, 2026)
- Rates and brackets
- Standard deduction
- Personal exemption
- Child tax credit
and other dependent tax credit - Limitations on itemized deductions (excluding SALT) and elimination of Pease limitation
- AMT changes
- Section 199A pass-through deduction and noncorporate loss limitation
- Making the TCJA estate tax
changes permanent (effective January 1, 2026) - Restoring the TCJA business tax provisions (effective January 1, 2026)
- 100 percent bonus depreciation
- R&D expensing
- EBITDA-based interest limitation
- Reinstituting the domestic production activities deduction (DPAD) at 28.5 percent to lower the effective corporate tax rate for domestic production to 15 percent
- Exempting tips from income taxes
- Exempting Social Security benefits from income taxes
- Exempting overtime pay from income taxes
- Creating an itemized deduction
for auto loan interest - Eliminating the green energy subsidies in the Inflation
Reduction Act (IRA) - Raising current Section 301 tariffs on China to 60 percent
- Imposing a universal tariff on all US imports of 20 percent
- Foreign retaliation of 10 percent on all US exports plus additional in-kind tariffs on US exports to China
So what can be the economic effects of Trump’s Tax proposals?
First and foremost it has been determined that the proposals would increase the 10-year budget deficit by some $3 trillion in a conventional manner, and $2.5 trillion dynamically. The debt to GDP radio would increase by some 20 percent to 223% conventionally and 217% dynamically. There would have to be higher interest payment on the debt that would reduce American incomes by at least .8% and on the long run of -0.1%. This would negatively attack our economy.
Trump proposes to eliminate the green energy tax credits put in place by the IRA. Since they are temporary expansions there should be no long-run economic impact from eliminating them. But anything with the words ‘green energy’ in it is just dynomite for Trump. He’s going to try and get rid of it, regardless if it helps the American people or not.
Now after all this explanation of what could have been, will it ever become policy? I highly doubt it, because Trump is so hell bent with tariffs right at the moment, he has already spend almost half of his first 100 days with no real accomplishment benefiting the American people. I can’t wait to count the lies that will leak from his 100 day accomplishment speech we will have to bear witness to. Now that will be very painful.