A growing number of Americans could be in line for a tax break if former President Donald Trump re-takes the White House — and so is the potential bill for paying for those cuts.
In recent months, Trump has floated a series of tax cuts for different groups, including senior citizens, tipped workers, people earning overtime and, most recently, homeowners in high-tax states. The latest proposal, which he Tuesday while campaigning in New York, would reverse a $10,000 deduction cap on state and local taxes (SALT) that he signed into law under the 2017 Tax Cuts & Jobs (TCJA) Act.
The cost of footing the bill for Trump’s tax proposals is growing, especially since they would come on top of his plans to extend tax cuts in the TCJA, which are set to expire in 2025, as well as to cut the corporate tax rate to 15% from its current level of 21%. To offset such costs with other sources of federal revenue, Trump has pointed to his plans to enact new tariffs on all imports into the U.S.
Tariff is “the most beautiful word there is,” Trump said in a September 14 interview with ABC 13 Las Vegas. He said he believes the nation’s deficit would be reduced “to a very manageable number” through tariffs. He added, “Ultimately, we can break it even, and it’s going to generate tremendous growth.”
Such tariffs are unlikely to come close to covering the bill for Trump’s growing 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 September 20 analysis from TD Cowen analyst Jaret Seiberg.
Trump’s proposed tariffs would likely generate $2.8 trillion in revenue over the same time period, the Tax Policy Center forecasts.
“The strategy does appear to me to show up at a location and make a promise to cut a tax based on what people in that location want,” 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 proposals. “It just seems like it’s every week or every few days, and the costs are really racking up.”
He added, “Tariffs can’t cover this whole agenda.”
The Trump campaign didn’t immediately respond to a request for comment.
Harris’ tax plans and deficit impact
To be sure, Vice President Kamala Harris is also promising a plethora of tax benefits, aimed at helping everyone from new parents to first-time homebuyers. Her campaign is proposing raising revenue by increasing the corporate tax rate to 28%. from its current 21%, and reversing tax cuts in the TCJA for high earners.
Her plans would result in the deficit growing by about $1.2 trillion over the next decade, compared with $5.8 trillion for Trump’s proposals, according to an estimate from the Penn Wharton Budget Model made prior to Trump’s SALT proposal. The Penn Wharton Budget Model is a group within the University of Pennsylvania’s Wharton School that analyzes the budgetary impact of government policies.
If Trump were to also eliminate the SALT deduction cap, his plans would increase the deficit by $6.9 trillion over the next decade, Kent Smetters, the faculty director of the Penn Wharton Budget Model, told CBS MoneyWatch on Friday.
Both presidential campaigns have come under fire from tax experts and fiscal hawks for potentially adding to the deficit, which is projected to hit $1.9 trillion in fiscal year 2024, according to the Congressional Budget Office’s forecast in June. That represents a 27% increase from the agency’s prior February forecast, due partly to new U.S. funding provided to Ukraine, Israel and other countries.
“It seems both candidates are likely to be in the red,” said Goldwein of the Committee for a Responsible Federal Budget.
Trump’s tax cuts — and their costs
One of the biggest costs in Trump’s tax proposals would stem from extending the TCJA tax cuts beyond 2025, noted TD Cowen’s Seiberg. Extending those tax breaks, which particularly benefited upper-income Americans, would cost $4.5 trillion over the next 10 years, assuming the SALT deduction cap remains unchanged at $10,000, he estimated.
Here’s how Seiberg estimates Trump’s recent tax break proposals would add to that cost:
- Eliminating income taxes on Social Security benefits: $1.6 trillion
- Scrapping taxes on overtime pay: $1.1 trillion over 10 years
- Restoring the full SALT deduction: $1 trillion over a decade
- Lowering the corporate tax rate: $673 billion
- Getting rid of taxes on tipped wages: $250 billion
“This could mean that Trump’s tax reform agenda would cost about $9 trillion over 10 years,” Seiberg concluded. “We view this as a difficult sell on Capitol Hill and to the market.”
Of course, both Trump and Harris would need to get their tax proposals 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 proposals could appeal to many taxpayers.
“Trump is far from the first candidate to promise a chicken in every pot,” Seiberg added. “It does not mean that he will deliver on these promises.”