Former President Donald J. Trump’s economic proposals will increase the nation’s debt burden and ultimately lead to a massive could increase costs for many Americans.
The Committee for a Responsible Federal Budget, a bipartisan group that seeks to reduce the budget deficit, has found that Trump’s various plans could increase the national debt by up to $15 trillion over 10 years. did. This is nearly double the economic plan proposed by Vice President Kamala Harris.
And an analysis by the liberal think tank Institute for Taxation and Economic Policy found that on average, Trump’s tax and tariff plans would amount to a tax increase for all but the top 5% of Americans. It turned out. .
The two new studies differ in several ways. The Budget Group looked at the costs of both candidates’ tax and spending plans over a 10-year period, while the Tax Institute focused on how Trump’s tax and tariff plans would affect them in 2026. By imposing a greater burden on those who earn the least money, it can be not only costly but also regressive.
Mr. Trump has launched a series of potentially far-reaching policies during his campaign, including exempting certain payroll taxes and imposing sweeping tariffs on nearly all imports into the United States. He also wants to extend elements of the 2017 tax law that are set to expire next year.
“It’s almost difficult to craft a tax plan that increases the deficit by hundreds of billions of dollars a year while raising taxes on the vast majority of Americans. And that’s what this policy is,” said Steve Wamhoff, ITEP’s director of federal policy. says. Said.
The CRFB cautioned that many of the proposals proposed by Mr. Trump and Ms. Harris lack detail, so their estimates still contain considerable uncertainty. Three cost scenarios were presented for each campaign’s initial economic agenda.
On the high end, Trump’s plan would cost $15 trillion over 10 years, while Harris’ plan would cost $8 trillion. In a moderate scenario, the former president’s second-term policies would cost $7.5 trillion, while Harris’ plan would cost $3.5 trillion. And at the lower end, Trump’s plan would increase the debt by $1.45 trillion by 2035, while Harris’ plan would increase nothing, making it “deficit neutral.”
“Both Republican and Democratic presidential candidates have campaign plans that maintain the status quo at best and significantly increase debt and deficits at worst,” the CRFB report said. “Even in the best-case scenario, neither candidate’s plan will be enough to put the debt on a downward trajectory and lead America to a more secure and sustainable fiscal future.”
Estimating the impact of Mr. Trump’s plan to make overtime pay and tips tax-free remains a challenge for budget forecasters in Washington. Many experts have warned that the proposal would lead to more people classifying their income as tips or overtime. Whether that happens could significantly change the cost of the plan and give higher-income Americans more resources to take advantage of tax breaks.
A team of researchers from the Institute on Tax and Economic Policy assumed that Americans would not change their behavior significantly because of these exemptions, pointing to uncertainty about the factors. They analyzed all of Mr. Trump’s tax proposals, including an extension of the 2017 tax cut, a full reinstatement of state and local tax credits, a corporate tax cut, and tax exemptions for tips, overtime pay, and Social Security benefits. They found that these plans cut taxes across the income spectrum, with higher-income Americans benefiting the most.
But the think tank estimates that the potential savings for many Americans from these cuts will be offset by Mr. Trump’s plan to impose broad tariffs on imported goods. Mr. Trump has floated several different proposals for raising tariffs, and researchers believe he would impose a 20% tariff on all imports and a 60% tariff on products from China. Based on. Their estimates include another tax increase, including the repeal of the green energy tax credit passed under President Biden.
Overall, Trump’s plan would provide the wealthiest 1% of Americans with an average tax cut worth 1.2% of their gross income, while the remaining top 5% would receive a 1.3% increase. All other income groups would lose out due to higher costs from tariffs, with the bottom 20 percent losing an average of 4.8 percent of their income.
ITEP calculated that this equates to the richest 1% paying $36,320 less in taxes and the bottom 20% paying $790 more. The middle 20 percent of Americans will pay an average of $1,530 more, or 2.1 percent of their income.
Tariffs raise the price of goods, placing a disproportionate burden on poor Americans who spend much of their money on food, clothing, and other consumer goods. Wealthy Americans also pay more because of tariffs, but the additional costs make up a much smaller portion of their total income. Low-income Americans pay less in taxes, so tax cuts will benefit them less than higher-income Americans.
Although Mr. Trump and his campaign argue that his tariffs only affect companies that do business overseas, it is important to note that the cost of import taxes will ultimately be passed on to U.S. consumers and businesses. This has been repeatedly found in research.
Trump said at the New York Economic Club last month that the tariffs “will generate billions of dollars in benefits and directly reduce the deficit.” He also said he would save money by creating a “Government Efficiency Board.”
Harris has repeatedly attacked Trump’s plan, but neither candidate has made deficit reduction a campaign priority. Instead, the two countries have kept one step ahead of the other with new tax cuts and spending initiatives. The cost estimate comes as the U.S. already has nearly $36 trillion in debt, with interest costs exceeding spending on military and social safety net programs.
For Harris, the biggest issue with the plan is how much of Trump’s 2017 tax law, which expires at the end of next year, will be recognized. The vice president said he would not approve tax increases for people making less than $400,000. But it’s unclear how she will treat certain deductions that favor small businesses, or tax breaks that companies can get for equipment purchases and research.
Another wild card is how she approaches the state and local tax deduction, known as SALT. Trump’s tax bill caps the SALT deduction at $10,000 to keep the overall cost of the bill down. The limit is set to expire in 2025, and many Democrats in high-tax blue states, including Senate Majority Leader Chuck Schumer of New York, are pushing for full reinstatement of the deduction. That would increase the budget deficit by more than $1 trillion over 10 years, overwhelmingly benefiting wealthy households.
