“Read my lips, no new taxes”. This is what former president George H. W. Bush claimed in a debate during the 1988 presidential campaign. He then found it necessary to raise taxes. The electorate would not forgive him, and elected Bill Clinton in 1992. Now, Donald Trump and the Republican party are secretky preparing to institute a huge realignment of the tax code if elected. Shhhh, they don’t want you to know. They are planning to institute Project 2025’s agenda following the election.
They will claim that the current 7 tier system of tax rates is too complicated and expensive for taxpayers. Hence, Project 2025 plans to remedy those problems, it proposes just two tax rates: a 15% flat tax for people earning up to about $168,000, (this instead of a 10 or 12% rate that they currently pay) and a 30% (instead of the 37% that they now pay) income tax for people earning above that, according to the document. It also proposes eliminating “most deductions, credits and exclusions,” although the blueprint doesn’t specify which ones would go and which would stay.
Millions of low- and middle-class households would likely face significantly higher taxes under the Project 2025’s proposals. It is estimated that a middle-class family with two children and an annual income of $100,000 would pay $2,600 in additional federal income tax if they faced a 15% flat tax on their income due to the loss of the 10% and 12% tax brackets. If the Child Tax Credit were also eliminated, they would pay an additional $6,600 compared with today’s tax system, By comparison, a married couple with two children and earnings of $5 million a year would enjoy a $325,000 tax cut.
Among other tax and economic changes proposed by Project 2025:
- Cutting the corporate tax rate to 18% from its current 21%, which was enacted in 2017’s Tax Cuts and Jobs Act. Prior to the TCJA, the corporate tax rate stood at 35%.Reducing the capital gains tax to 15%. Currently, high-income earners pay a tax of 20% on their capital gains.
- Eliminating credits for green energy projects created by the Inflation Reduction Act.
- Considering the introduction of a U.S. consumption tax, such as a national sales tax.
- Eliminating the Federal Reserve’s mandate to maintain full employment in the labor market.
These are not the only tax increases that the Middle Class will be forced to bear under Trump. There is also the issue of his tariffs which are not paid by the country they are imposed on, but by the consumer.
Regardless of whether Joe Biden or Donald Trump wins a coveted second term, inflation will increase, predicts the research firm Oxford Economics.
The main drivers of inflation under Trump would be his draconian immigration policies, which would shrink the available workforce; a further cut of corporate tax rates, and, most notably, an unprecedented set of tariffs on all foreign goods.
Assuming that under a Trump presidency he would succeed in implementing his recently announced blanket tariffs, Trump’s unprecedented proposal which includes a 60% tariff on all Chinese goods and a 10% tariff on goods from any other country. If implemented they would almost certainly act as a tax on American households, as businesses would simply raise prices and pass on their added costs to consumers.
Other economists have agree that the tariffs could be inflationary. Several different studies estimated Trump’s proposed tariffs would amount to a $1,700 to $2,350 increase in annual expenses for households.
