5 New Tax Cuts from Trump
Last week Trump's based spokeswoman announced his tax plans for the coming year.
It's a beauty.
While Congress writes tax law, Presidents set out the kind of bill they'd like to see from Congress. At which point it becomes a back-and-forth between the White House and the drunk sailors in Congress.
Given it’s a GOP Congress and Trump has 90%-plus support from Republican voters, he’ll have a lot of leverage in this back-and-forth.
Trump’s 5 New Tax Cuts
Trump's proposing to extend his first-term cuts, along with 5 new tax cuts along with closing 2 tax loopholes on special interests. In all they sum to between $500 billion and $1.1 trillion per year (see chart below). Which would be about 10-20% of federal taxes.
Extending Trump’s first-term cuts are about half of this. They trimmed the top income tax rate from 39.6% to 37%, but the real magic was slashing the business tax from an extortionate 35% to just 21%.
The new cuts are no tax on tips, no tax on overtime, and no tax on social security payments. Along with increasing the so-called Salt Cap that hits rich people in blue states.
Plus — and this one’s key — a new tax cut specifically for Made in America products. Trump’s floated this at 15%.
Meanwhile, the loopholes — which are technically tax hikes — are eliminating sweetheart rates for fund managers, called carried interest. And getting rid of breaks for "billionaire sports team owners.” Which I guess is a pet project for the Don.
Popular Cuts
As always with Trump, the cuts are exactly what he promised on the campaign trail. And cutting taxes on tips and overtime very specifically aims that tax cut goodness at his working-class base who are the ones who earn tips and overtime.
This is massively popular, since Americans of all parties like helping working-class people who actually work. A Newsweek poll found 67% want no tax on tips — just 19% think tips should be taxed.
Even more popular is Trump's No tax on social security payments, given that it's double taxing money they already paid.
In fact, given the actual rates of return of social security for the middle class are something like one-quarter of investing it on your own, it's pretty rich that they steal three-quarters of your retirement and then tax you on the swindle.
The Salt cap is a bit more complicated; the original idea was limit how much federal taxes rich people in blue states can deduct for their state taxes.
This was effectively a federal subsidy to blue states like California or New York, and Trump reined it in.
Still, as you'd expect, blue state voters hate the Salt cap. So Trump's using it as a bargaining chip to bring on suburban Republicans and maybe even some Dems.
Mixing Popular Cuts with High-Impact Cuts
Put it together and you've got 3 massively popular tax cuts -- tips, overtime, social security. And a Salt adjustment that's tactically popular. While the loopholes are also popular — nobody likes rich hedge funds while “billionaire” sports teams owners can take care of themselves.
Now, the trick in tax cuts is the tax cuts that boost growth, like business tax and capital gains are not very popular. Because they're easy to demonize given they reward investing in economic growth and rich people are the ones who invest.
So you want to mix the high-impact tax cuts with the popular ones.
And that's, hopefully, where Trump's Made in America cuts come in. They're a very elegant way to frame cuts in business tax for what they are: a way to make the country more prosperous. In contrast to the left's Marxist class-war distributionist framing.
Hopefully that’s a frame the GOP continues using, to get us out of the “Eat the Rich” arguments and focus on growing the pie.
What’s Next
Trump 2.0 is getting very good at communicating his goals. Assuming he does pair high-impact cuts with popular cuts, Trump stands a very good chance of getting his cuts into law and making a big impact on economic growth.
As for the long game, Trump's repeatedly said he'd like to get rid of the entire income tax — I recently wrote about it here on the newsletter.
Exempting broad categories moves us a lot closer to getting ride of income tax — it starts to frame them as something punitive, rather than a fact of life. And if tariffs can generate the revenue and DOGE can generate the cuts it actually becomes possible to end the income tax — one of the most destructive pieces of legislation in the history of the Republic.
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Professor!!! What do you think the prospects of Congress writing into the budget cuts to USAID and specific program cuts across the federal government prohibiting NGO grants and contracts? Also writing into law DOGE as a permanent deep review agency for the executive branch, and deleting the GAO which has been useless
Nicely done article. It appears to me that taxation runs in proportion to the amount of corruption and fraud congress hopes to commit spending tax dollars. Maybe we really don't have much of a spending deficit and most of it is wasted on fraud.
These tax cuts are fine and many times we don't see results for a year or two. I am more concerned about the long term. All these changes are nice but will they stick after Trump is history?
I don't believe for a second that liberals and republicans in congress will change their spendthrift ways for the long term. Their corrupt ways and methods are bone deep.