November 8, 2024 • 12 mins
Join hosts Kyle Hulehan and Erica York in this episode of The Deduction as they break down the US tax policy implications of Donald Trump’s next presidential term. With the GOP gaining control over the White House and likely both chambers of Congress, the discussion centers around potential legislative changes, the future of tax cuts, and the impact of tariffs on everyday taxpayers. Get insights into what Trump’s tax extensions and new proposals could mean for the economy, federal revenue, and household finances.
Links:
https://taxfoundation.org/research/all/federal/donald-trump-tax-plan-2024/
https://taxfoundation.org/blog/trump-tariffs-revenue-estimates/
https://taxfoundation.org/blog/largest-tax-increase-harris-trump/
Follow us!
https://twitter.com/TaxFoundation
https://twitter.com/deductionpod
Support the show
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Kyle Hulehan (00:00):
Hello and welcome to The Deduction, a Tax
(00:02):
Foundation podcast.
I'm your host, Kyle Houlihan,and we are back again today with
another election episode with myco host, Erika York, Senior
Economist and Research Directorhere at the Tax Foundation.
Erika, how are you doing today?
Erica York (00:15):
Doing well, Kyle.
How are you?
Kyle Hulehan (00:16):
I'm good.
The election is finally over.
I have had an overwhelmingamount of ads that I am so
thankful to be done with and tonever watch anymore.
I'm in New Jersey right acrossthe border from Pennsylvania and
I have been crushed by ads.
So that's done.
The election is over.
And today we're going to breakdown what Donald Trump and his
(00:39):
presidency are going to mean foryou.
So let's just dive in.
Uh, you know, Erica, it lookslike the GOP is going to have
control over the House, theSenate and, of course, the
presidency.
What do these results mean forthe U.
S.
Going forward and tax plans andsuch?
Erica York (00:54):
Yeah.
So a GOP trifecta means that theVenn diagram of what leaders in
the Senate and leaders in theHouse and of course the
president want to do has a lotof overlap.
Um, so the, the buzzword thatpeople are probably going to
start hearing a lot isreconciliation.
Um, this is a legislativeprocedure that essentially Let's
(01:15):
Congress fast track, um, policy,pass it with a simple majority
in the Senate.
It's the tool that was used toenact the 2017 tax law, the tax
cuts and jobs act.
And it's probably the toolthat's going to be used again to
act on taxes.
Um, you know, there's rumblingsright now.
There's been reporting that, um,lawmakers want to rip off the
(01:37):
mandate and pursue tax policychanges like right from the get
go.
So I think it's, um, Watch andsee there's the potential that
something on tax policy couldhappen very fast in the new
year.
Kyle Hulehan (01:51):
So when we're talking about these, you know,
something happening on tax isthe president is his plan to
extend the TCJ.
We had had this whole episodeabout, you know, our tax cuts
are expiring and that would be alot of money for us.
So what's the plan there?
Erica York (02:05):
Yeah, it's, I would say it's a, it's a question
mark.
Um, Trump obviously campaignedon extending those tax cuts.
That alone would reduce revenueby more than 4 trillion over the
next decade.
He also campaigned on adding alot of tax cuts on top of that.
So exempting tips, exemptingsocial security, exempting
(02:25):
overtime pay from income taxes.
Creating this.
Um, itemized deduction for autoloan interest, all of these
various ideas.
So now the question becomesgiven that those tax cuts all
add up to, you know, about 8trillion of lower revenue over
the next decade for the federalgovernment.
What does Congress do with that?
We know what.
Trump's opening bid is it's allof those tax cuts.
(02:48):
Um, but deficits are going to bea big concern because we have
high interest rates.
We already have climbing debt,um, for the federal government.
So that puts pressure onlawmakers to find ways to trim
the cost.
Um, and that complicates thedebate quite a bit when there
are even more asks.
I think what happens is someform of extension of those
(03:09):
expiring tax cuts.
One thing that I've beenthinking through is how would an
everyday taxpayer You know, feelthat we're all used to the tax
cuts and Jobs Act.
We've been paying taxes underthat for the past six years.
Um, you know, we have a 2000child tax credit.
It's not really going to feellike a tax cut.
(03:29):
If that gets extended, it's justgoing to feel like the same old
policy.
Um, and then if you layer it ontop of that, You know, offsets,
ways to pay for that on top, youcould actually feel worse
compared to what you feel rightnow.
Um, and that's because, youknow, everyday taxpayers operate
under a different baseline thanCongress does.
Congress knows those tax cutsare expiring.
(03:50):
If they extend them, that's atax cut in budget terms.
But for everyday people, itmight not feel like it.
So I think it's going to betough politically for Congress
to figure out what to do.
Kyle Hulehan (03:59):
That's really interesting.
I, I think, I'm wondering, doyou feel like there are any
specific ideas, or has anythingbeen talked about, about what
would be cut, because 8 trillionis so much.
Erica York (04:11):
Yeah, there hasn't been a lot of detail yet.
And unfortunately, um, some ofsome of the offsets, some of the
ways that, um, they, you know,quote unquote paid for some of
these tax cuts.
The first time around was toplace limitations on itemized
deductions.
So we limit how much people candeduct and we use that revenue
to reduce rates.
(04:33):
There's been a lot of pushbackagainst some of those
limitations, particularly thelimitation on state and local
tax deductions.
Salt might be, you know, abuzzword people have heard
about.
Um, if you lift the salt cap,that actually makes it even more
expensive to do the tax cuts.
So, I haven't seen anythingclear.
I think there's probably a lotof brainstorming going on right
(04:54):
now.
You know, what do we prioritize?
Can we look at other areas ofthe tax code?
One idea that Trump has that isis a good one is to look at some
of the green energy tax creditspassed in the Inflation
Reduction Act and pull back onon some of those.
Um, we've estimated that if yougot rid of All of those
entirely, that would raise alittle more than 900 billion
(05:16):
dollars, which is a lot, but youknow, it's less than a fourth of
the cost of the tax cuts, therevenue loss of the tax cut
extension.
Um, so that would still meanthey come up really short and
that might also be politicallydifficult to pull back on what
have proven to be pretty populartax credits.
Kyle Hulehan (05:36):
And to get to what has been so far, uh, you know,
sort of the magic bullet, uh,the thing that's going to raise
a lot of money for everything,how will tariffs be implemented,
and how much could this costtaxpayers?
Erica York (05:50):
This is another really uncertain area.
So Congress has delegated a lotof authority to the executive,
allowing a president to imposetariffs in certain instances.
Um, Trump used a lot of theseauthorities during his first
term to put tariffs on steel andaluminum, China, washing
machines.
solar panels.
Um, and he's talked about usingthose authorities again to
(06:13):
increase tariffs on China toimpose tariffs on Mexico and
potentially do this universalbaseline tariff idea.
We just published new estimatesyesterday on how much revenue
could be raised by thisuniversal tariff.
If it's set at 10%, which Trumphas talked about, we estimate it
would raise about 2 trillion inhigher tax revenue over the
(06:36):
budget window.
If he does it at 20%, it wouldraise a bit more than 3
trillion.
So still well short of that 4trillion number.
And the burden of those tariffswould fall hardest on lower and
middle income households, um,lower and middle income
households, as we've talkedabout before, consume more of
their income than higher incomehouseholds who can afford to
(06:57):
save more of their income.
So by consuming more andconsuming more traded goods.
Um, you know, most of, of thethings we, we buy at Walmart,
um, a lot of our food,especially if you think about,
you know, access to fresh foodduring the winter, um, coffee,
that sort of thing that'simported.
Um, if the cost of that goes up,that's particularly hard on
(07:18):
lower and middle incomehouseholds.
And then that brings me back tothat point I was talking about
earlier, you know, justcontinuing the tax cuts isn't
going to feel personally like abig tax cut.
And if you combine that with.
Higher prices at the grocerystore that that feels like
you're worse off by quite a bit.
And in fact, some lower andmiddle income households would
be worse off under tariffs as apay for.
(07:41):
So I don't think that's a usefulavenue, but it does seem like it
is at least somewhat.
Politically possible, especiallybecause that authority lies with
the president and we know thatTrump has a different view of
tariffs and really believes inthem and so is probably like
likely to pursue them in someform or fashion.
Kyle Hulehan (08:03):
So wait, could you, could you clarify that for
me real quick?
He, he can just, the, PresidentTrump is, Can just implement
tariffs on his own.
He doesn't really need anybodyelse's authority.
Erica York (08:13):
Right.
There's no up or down vote inCongress for, for tariffs.
Um, now there are someprocedural rules that have to be
followed.
Um, for instance, you know, itmight require an investigation
by the United States traderepresentative or the commerce
department.
Um, so they would go throughthat investigative process,
issue a report withrecommendations, and then the
(08:35):
president can act on thoserecommendations and, you know,
choose to, to implement tariffs.
Um, some of the, the, like,Statutory reasons for, um, and
instigating an investigation orthings like unfair trade
practices, national securityconcerns.
So the, the big question islike, whether those authorities
(08:56):
would really allow the presidentto do a universal tariff on
everything.
There are some emergencyauthorities where the president
can declare some sort ofnational emergency.
And then in response to that, doa universal tariff.
And that case, those would betemporary universal tariffs Um,
so that complicates the questionof, like, can these pay for tax
(09:16):
reform if they're only atemporary thing?
Um, can he just continuallyreauthorize the temporary
tariffs?
Lots of questions, um, but, youknow, what we saw in the first
term was that the Trumpadministration Didn't have much
hesitancy for kind of pushingthe envelope on what trade
authority is permitted.
(09:36):
And so I, I don't have a lot ofdoubt that we would see
something similar this timearound.
Kyle Hulehan (09:42):
Okay.
Wow.
Yeah.
I mean, I think that mightsurprise a lot of listeners to
know that the president has somuch power over tariffs.
It's sort of a an uncheckedpower.
Now we've been a little negativeagain.
I mean, you know, maybe not ashopeful and positive.
You know, I think, you know,very clearly, you know, the
election was a very clearresult.
Um, the there was a rejection ofthe Biden administration.
(10:03):
No doubt.
Um, and And economy was a bigimportant issue.
And I'm just wondering if, youknow, we have modeled Donald
Trump's tax plan and there issome good in it.
And I'm wondering maybe if youcould share some of that good to
maybe end on a little bit of ahopeful note that maybe the
economy would do a little bitbetter.
Erica York (10:21):
Yeah, I went to what Trump has proposed on taxes,
especially if we look at the,Investment type provisions that
he's talked about, even on thecampaign trail.
Um, he talked about fullexpensing for capital
investment, full expensing forresearch and development.
Um, all of those are goodthings.
Those would boost incentives toinvest in the U S economy.
They would grow wages.
(10:42):
They would grow how much weproduce here.
Um, so, so that's, that's good.
Um, and generally on taxes, we,we see several good ideas like
that.
We also see the, the complicatedideas, um, The big deficit
impact, the tariffs, um, so thenet effect that they have on the
economy will really depend onwhat gets prioritized and what
(11:03):
gets implemented, but there ispromise for improvement on the
tax policy front.
Kyle Hulehan (11:08):
So there you go, folks.
I mean, look, we can't, wecan't, you know, uh, give you,
you know, a hundred percentperfect picture of everything
that's going to happen.
We don't know what's going tohappen.
I think there to some degree,um, President Trump, um, when
he's on the campaign trail sayssome things and, you know,
that's okay.
I think we'll, we'll see what hedoes and we have his, his plan
modeled.
You can check that out on ourwebsite.
(11:29):
Um, but real quick before wesign off, I do want to plug we
have an online event next week.
So please subscribe to ourYouTube channel here, you know,
click that little bell andyou'll be notified for our
event.
Uh, it's a big event, uh, nextweek about just election
takeaways, you know, and that'son November 15th, and you'll get
a lot of information about theelection and our takeaways and
(11:52):
where tax policy and the economyis going.
Erica, I just want to say thankyou for being on the show today.
It's been a pleasure doing thiswith you.
Erica York (11:59):
Yeah.
Thank you, Kyle.
This has been a lot of fun.
Kyle Hulehan (12:01):
It really has been.
And so before we sign off, ifyou have any more questions,
keep sending them our way.
And you can do that at Podcastat tax foundation.
org.
That's our email.
And then on Twitter, it's atdeduction pod.
Thank you for listening.
Hello and welcome to The Deduction, a Tax
(00:02):
Foundation podcast.
I'm your host, Kyle Houlihan,and we are back again today with
another election episode with myco host, Erika York, Senior
Economist and Research Directorhere at the Tax Foundation.
Erika, how are you doing today?
Erica York (00:15):
Doing well, Kyle.
How are you?
Kyle Hulehan (00:16):
I'm good.
The election is finally over.
I have had an overwhelmingamount of ads that I am so
thankful to be done with and tonever watch anymore.
I'm in New Jersey right acrossthe border from Pennsylvania and
I have been crushed by ads.
So that's done.
The election is over.
And today we're going to breakdown what Donald Trump and his
(00:39):
presidency are going to mean foryou.
So let's just dive in.
Uh, you know, Erica, it lookslike the GOP is going to have
control over the House, theSenate and, of course, the
presidency.
What do these results mean forthe U.
S.
Going forward and tax plans andsuch?
Erica York (00:54):
Yeah.
So a GOP trifecta means that theVenn diagram of what leaders in
the Senate and leaders in theHouse and of course the
president want to do has a lotof overlap.
Um, so the, the buzzword thatpeople are probably going to
start hearing a lot isreconciliation.
Um, this is a legislativeprocedure that essentially Let's
(01:15):
Congress fast track, um, policy,pass it with a simple majority
in the Senate.
It's the tool that was used toenact the 2017 tax law, the tax
cuts and jobs act.
And it's probably the toolthat's going to be used again to
act on taxes.
Um, you know, there's rumblingsright now.
There's been reporting that, um,lawmakers want to rip off the
(01:37):
mandate and pursue tax policychanges like right from the get
go.
So I think it's, um, Watch andsee there's the potential that
something on tax policy couldhappen very fast in the new
year.
Kyle Hulehan (01:51):
So when we're talking about these, you know,
something happening on tax isthe president is his plan to
extend the TCJ.
We had had this whole episodeabout, you know, our tax cuts
are expiring and that would be alot of money for us.
So what's the plan there?
Erica York (02:05):
Yeah, it's, I would say it's a, it's a question
mark.
Um, Trump obviously campaignedon extending those tax cuts.
That alone would reduce revenueby more than 4 trillion over the
next decade.
He also campaigned on adding alot of tax cuts on top of that.
So exempting tips, exemptingsocial security, exempting
(02:25):
overtime pay from income taxes.
Creating this.
Um, itemized deduction for autoloan interest, all of these
various ideas.
So now the question becomesgiven that those tax cuts all
add up to, you know, about 8trillion of lower revenue over
the next decade for the federalgovernment.
What does Congress do with that?
We know what.
Trump's opening bid is it's allof those tax cuts.
(02:48):
Um, but deficits are going to bea big concern because we have
high interest rates.
We already have climbing debt,um, for the federal government.
So that puts pressure onlawmakers to find ways to trim
the cost.
Um, and that complicates thedebate quite a bit when there
are even more asks.
I think what happens is someform of extension of those
(03:09):
expiring tax cuts.
One thing that I've beenthinking through is how would an
everyday taxpayer You know, feelthat we're all used to the tax
cuts and Jobs Act.
We've been paying taxes underthat for the past six years.
Um, you know, we have a 2000child tax credit.
It's not really going to feellike a tax cut.
(03:29):
If that gets extended, it's justgoing to feel like the same old
policy.
Um, and then if you layer it ontop of that, You know, offsets,
ways to pay for that on top, youcould actually feel worse
compared to what you feel rightnow.
Um, and that's because, youknow, everyday taxpayers operate
under a different baseline thanCongress does.
Congress knows those tax cutsare expiring.
(03:50):
If they extend them, that's atax cut in budget terms.
But for everyday people, itmight not feel like it.
So I think it's going to betough politically for Congress
to figure out what to do.
Kyle Hulehan (03:59):
That's really interesting.
I, I think, I'm wondering, doyou feel like there are any
specific ideas, or has anythingbeen talked about, about what
would be cut, because 8 trillionis so much.
Erica York (04:11):
Yeah, there hasn't been a lot of detail yet.
And unfortunately, um, some ofsome of the offsets, some of the
ways that, um, they, you know,quote unquote paid for some of
these tax cuts.
The first time around was toplace limitations on itemized
deductions.
So we limit how much people candeduct and we use that revenue
to reduce rates.
(04:33):
There's been a lot of pushbackagainst some of those
limitations, particularly thelimitation on state and local
tax deductions.
Salt might be, you know, abuzzword people have heard
about.
Um, if you lift the salt cap,that actually makes it even more
expensive to do the tax cuts.
So, I haven't seen anythingclear.
I think there's probably a lotof brainstorming going on right
(04:54):
now.
You know, what do we prioritize?
Can we look at other areas ofthe tax code?
One idea that Trump has that isis a good one is to look at some
of the green energy tax creditspassed in the Inflation
Reduction Act and pull back onon some of those.
Um, we've estimated that if yougot rid of All of those
entirely, that would raise alittle more than 900 billion
(05:16):
dollars, which is a lot, but youknow, it's less than a fourth of
the cost of the tax cuts, therevenue loss of the tax cut
extension.
Um, so that would still meanthey come up really short and
that might also be politicallydifficult to pull back on what
have proven to be pretty populartax credits.
Kyle Hulehan (05:36):
And to get to what has been so far, uh, you know,
sort of the magic bullet, uh,the thing that's going to raise
a lot of money for everything,how will tariffs be implemented,
and how much could this costtaxpayers?
Erica York (05:50):
This is another really uncertain area.
So Congress has delegated a lotof authority to the executive,
allowing a president to imposetariffs in certain instances.
Um, Trump used a lot of theseauthorities during his first
term to put tariffs on steel andaluminum, China, washing
machines.
solar panels.
Um, and he's talked about usingthose authorities again to
(06:13):
increase tariffs on China toimpose tariffs on Mexico and
potentially do this universalbaseline tariff idea.
We just published new estimatesyesterday on how much revenue
could be raised by thisuniversal tariff.
If it's set at 10%, which Trumphas talked about, we estimate it
would raise about 2 trillion inhigher tax revenue over the
(06:36):
budget window.
If he does it at 20%, it wouldraise a bit more than 3
trillion.
So still well short of that 4trillion number.
And the burden of those tariffswould fall hardest on lower and
middle income households, um,lower and middle income
households, as we've talkedabout before, consume more of
their income than higher incomehouseholds who can afford to
(06:57):
save more of their income.
So by consuming more andconsuming more traded goods.
Um, you know, most of, of thethings we, we buy at Walmart,
um, a lot of our food,especially if you think about,
you know, access to fresh foodduring the winter, um, coffee,
that sort of thing that'simported.
Um, if the cost of that goes up,that's particularly hard on
(07:18):
lower and middle incomehouseholds.
And then that brings me back tothat point I was talking about
earlier, you know, justcontinuing the tax cuts isn't
going to feel personally like abig tax cut.
And if you combine that with.
Higher prices at the grocerystore that that feels like
you're worse off by quite a bit.
And in fact, some lower andmiddle income households would
be worse off under tariffs as apay for.
(07:41):
So I don't think that's a usefulavenue, but it does seem like it
is at least somewhat.
Politically possible, especiallybecause that authority lies with
the president and we know thatTrump has a different view of
tariffs and really believes inthem and so is probably like
likely to pursue them in someform or fashion.
Kyle Hulehan (08:03):
So wait, could you, could you clarify that for
me real quick?
He, he can just, the, PresidentTrump is, Can just implement
tariffs on his own.
He doesn't really need anybodyelse's authority.
Erica York (08:13):
Right.
There's no up or down vote inCongress for, for tariffs.
Um, now there are someprocedural rules that have to be
followed.
Um, for instance, you know, itmight require an investigation
by the United States traderepresentative or the commerce
department.
Um, so they would go throughthat investigative process,
issue a report withrecommendations, and then the
(08:35):
president can act on thoserecommendations and, you know,
choose to, to implement tariffs.
Um, some of the, the, like,Statutory reasons for, um, and
instigating an investigation orthings like unfair trade
practices, national securityconcerns.
So the, the big question islike, whether those authorities
(08:56):
would really allow the presidentto do a universal tariff on
everything.
There are some emergencyauthorities where the president
can declare some sort ofnational emergency.
And then in response to that, doa universal tariff.
And that case, those would betemporary universal tariffs Um,
so that complicates the questionof, like, can these pay for tax
(09:16):
reform if they're only atemporary thing?
Um, can he just continuallyreauthorize the temporary
tariffs?
Lots of questions, um, but, youknow, what we saw in the first
term was that the Trumpadministration Didn't have much
hesitancy for kind of pushingthe envelope on what trade
authority is permitted.
(09:36):
And so I, I don't have a lot ofdoubt that we would see
something similar this timearound.
Kyle Hulehan (09:42):
Okay.
Wow.
Yeah.
I mean, I think that mightsurprise a lot of listeners to
know that the president has somuch power over tariffs.
It's sort of a an uncheckedpower.
Now we've been a little negativeagain.
I mean, you know, maybe not ashopeful and positive.
You know, I think, you know,very clearly, you know, the
election was a very clearresult.
Um, the there was a rejection ofthe Biden administration.
(10:03):
No doubt.
Um, and And economy was a bigimportant issue.
And I'm just wondering if, youknow, we have modeled Donald
Trump's tax plan and there issome good in it.
And I'm wondering maybe if youcould share some of that good to
maybe end on a little bit of ahopeful note that maybe the
economy would do a little bitbetter.
Erica York (10:21):
Yeah, I went to what Trump has proposed on taxes,
especially if we look at the,Investment type provisions that
he's talked about, even on thecampaign trail.
Um, he talked about fullexpensing for capital
investment, full expensing forresearch and development.
Um, all of those are goodthings.
Those would boost incentives toinvest in the U S economy.
They would grow wages.
(10:42):
They would grow how much weproduce here.
Um, so, so that's, that's good.
Um, and generally on taxes, we,we see several good ideas like
that.
We also see the, the complicatedideas, um, The big deficit
impact, the tariffs, um, so thenet effect that they have on the
economy will really depend onwhat gets prioritized and what
(11:03):
gets implemented, but there ispromise for improvement on the
tax policy front.
Kyle Hulehan (11:08):
So there you go, folks.
I mean, look, we can't, wecan't, you know, uh, give you,
you know, a hundred percentperfect picture of everything
that's going to happen.
We don't know what's going tohappen.
I think there to some degree,um, President Trump, um, when
he's on the campaign trail sayssome things and, you know,
that's okay.
I think we'll, we'll see what hedoes and we have his, his plan
modeled.
You can check that out on ourwebsite.
(11:29):
Um, but real quick before wesign off, I do want to plug we
have an online event next week.
So please subscribe to ourYouTube channel here, you know,
click that little bell andyou'll be notified for our
event.
Uh, it's a big event, uh, nextweek about just election
takeaways, you know, and that'son November 15th, and you'll get
a lot of information about theelection and our takeaways and
(11:52):
where tax policy and the economyis going.
Erica, I just want to say thankyou for being on the show today.
It's been a pleasure doing thiswith you.
Erica York (11:59):
Yeah.
Thank you, Kyle.
This has been a lot of fun.
Kyle Hulehan (12:01):
It really has been.
And so before we sign off, ifyou have any more questions,
keep sending them our way.
And you can do that at Podcastat tax foundation.
org.
That's our email.
And then on Twitter, it's atdeduction pod.
Thank you for listening.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!