If elected for a second term in the White House, Donald Trump’s policies could lead to tax cuts for over 90 million people, according to a new economic estimate from CNBC, but the former president’s plan worries financial experts.
The report discovered that roughly 93.2 million Americans would see the cuts due to sweeping income tax breaks promised by Trump if he defeats Vice President Kamala Harris next month.
Trump, the Republican nominee, has also called for an end to income tax on tips and Social Security benefits. Overtime pay would also be protected from federal taxes, and the former president recently said he’d consider tax exemptions for public service workers like police officers and firefighters along with members of the military.
The former president said tariffs would compensate for the lost revenue from the tax cuts, but according to CNBC, Trump’s tariffs would only raise $3.8 trillion over 10 years, while the income taxes are predicted to generate $33 trillion.
Around 68 million Americans receive Social Security, while roughly 30 million are veterans or work in public service. But Trump has talked up the benefits of tariffs, hearkening back to the late 19th century. “In the old days when we were smart, when we were a smart country, in the 1890s and all, this is when the country was relatively the richest it ever was. It had all tariffs. It didn’t have an income tax,” Trump said during an interview on Fox & Friends. “Now we have income taxes, and we have people that are dying.”
The tariffs specifically call for 20 percent on all imports, while a 60 percent tariff would be enacted for Chinese imports.
“Middle-income families would stand to benefit on the surface,” Michael Ryan, finance expert and founder of michaelryanmoney.com, told Newsweek. “The proposal includes raising the standard deduction and expanding the Child Tax Credit, which translates to more financial support for those who need it. However, let’s be honest: high-income earners and corporations are poised to receive the largest tax breaks.”
Economic experts are also not sure that the math behind tariffs making up for the lost tax revenue adds up. “This round, if he is elected, will largely take the same approach in scaling back tax obligations in the hopes it will generate more spending, more hiring, and, ultimately, more revenue for the federal government through more production,” Alex Beene, financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
“However, data from past tax cuts is shaky as to how much this strategy actually works, and when you pair it with a growing national debt, it calls into question just how much taxes can be cut without adding significantly more to the trillions we already owe.”
Tariffs often spur higher prices for American consumers as companies adjust to the increased cost of getting products inside the country.
While the tax cuts would impact at least 38 percent of the American voting base, many would see significantly higher prices on everything from food to clothing and home goods, experts say.
“At the end of the day, no one is going to turn down a tax cut, but from a long-term economic standpoint, there’s a reason why some economists are raising a red flag on these potential cuts,” Beene said.
Kevin Thompson, finance expert and founder/CEO of 9i Capital Group, said the tax cuts could also negatively affect inflation, as more money in the hands of consumers typically drives prices up.
“This policy could also be a problem for the U.S. budget, as the growth generated by lower taxes might not be enough to offset the revenue loss,” Thompson told Newsweek. “Trying to revive low-wage manufacturing jobs, for example, might actually increase costs, as wages rise and those costs get passed on to consumers—essentially fueling inflation.”
Newsweek reached out to Trump and Harris for comment via email on Tuesday.
If Trump wins the election in November, it might be difficult to approve the tax cuts without a Republican majority in at least the House of Representatives. The GOP at the moment holds a slight majority in the lower chamber, and this could change after the election.
Ryan said Trump’s tax cuts would contribute $5.8 trillion to the national debt over the next 10 years, and the debt-to-gross domestic product ratio could skyrocket to 211 percent by 2054.
“It’s similar to accumulating credit card debt—exciting at first, but eventually, the bills will come due,” Ryan added.
“Tax cuts generally enjoy popularity, but many lawmakers are cautious about the escalating debt.”
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