A growing number of Americans could be eligible for tax cuts if former President Donald Trump returns to the White House. And so could the potential bill to pay for those cuts.
In recent months, Trump has proposed a series of tax cuts for various groups, including seniors, tipping employeespeople who earn overtime and, most recently, homeowners in high-tax states. The latest proposal, which he made Tuesday while campaigning in New York, would reverse a $10,000 deduction limit on state and local taxes (SALT) that he signed into law in 2017 under the Tax Cuts & Jobs (TCJA) Act.
The cost of footing the bill for Trump’s tax proposals is mounting, especially since they come on top of his plans to extend the tax cuts in the TCJA, which expire in 2025, and to cut the corporate tax rate from its current 21% to 15%. To offset such costs with other sources of federal revenue, Trump has touted his plans to impose new tariffs on all imports into the U.S.
Tariffs are “the most beautiful word there is,” Trump said in a Sept. 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: “Eventually we can break even and it will generate tremendous growth.”
Such tariffs are unlikely to come close to footing the bill for Trump’s growing list of tax cuts, policy experts say. Trump’s proposed tax cuts together could cost as much as $9 trillion over the next decade, according to a Sept. 20 analysis by TD Cowen analyst Jaret Seiberg.
According to the Tax Policy Center, Trump’s proposed tariffs would likely generate $2.8 trillion in revenue over the same period.
“The strategy seems to me to be to show up in a location and make a promise to cut a tax based on what people in that location want,” Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, a think tank that advocates for lower federal deficits, told CBS MoneyWatch of Trump’s proposals. “It just seems like it happens every week or every couple of days, and the costs really add up.”
He added: “Tariffs cannot cover this entire agenda.”
Trump’s campaign did not immediately respond to a request for comment.
Harris’ tax plans and their implications for the budget deficit
To be sure, Vice President Kamala Harris is also promising a plethora of tax breaks aimed at helping everyone from new parents to first-time homebuyers. Her campaign proposes to raise revenue by raising the corporate tax rate from the current 21% to 28% and rolling back tax cuts in the TCJA for high-income earners.
Her plans would result in a deficit that would grow by about $1.2 trillion over the next decade, compared with $5.8 trillion under Trump’s proposals, according to an estimate from the Penn Wharton Budget Model, which was created before Trump’s SALT proposal. The Penn Wharton Budget Model is a group within the Wharton School of the University of Pennsylvania that analyzes the budgetary impact of government policies.
If Trump also eliminates 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 expected to reach $1.9 trillion in fiscal year 2024, according to a June projection from the Congressional Budget Office. That’s a 27% increase from the agency’s previous forecast in February, partly because of new U.S. funding provided to Ukraine, Israel and other countries.
“It appears that both candidates are going to end up 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 of Trump’s tax proposals would come from extending the TCJA tax cuts beyond 2025, TD Cowen’s Seiberg noted. Extending those tax breaks, which are notably benefited high-income AmericansHe estimates that this would cost $4.5 trillion over the next 10 years, assuming the SALT deduction cap remains unchanged at $10,000.
Seiberg estimates that Trump’s recent tax cut proposals will increase costs as follows:
- Eliminate income tax on Social Security benefits: $1.6 trillion
- Elimination of Overtime Taxes: $1.1 Trillion Over 10 Years
- Restoring the Full SALT Deduction: $1 Trillion Over a Decade
- Corporate tax cut: $673 billion
- Eliminating taxes on tips: $250 billion
“This could mean that Trump’s tax reform agenda would cost about $9 trillion over 10 years,” Seiberg concluded. “We see this as a tough sell on Capitol Hill and to the market.”
Of course, both Trump and Harris would need to get their tax proposals approved by Congress to override existing tax law, a high hurdle 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. “That doesn’t mean he’ll follow through on those promises.”
