Daily News

[Blackpill]

Donald Trump's return raises prospect of global tax war​

Using the Tax Foundation’s General Equilibrium Model, we estimate Trump’s tax proposals would increase long-run GDP by 0.8 percent, the capital stock by 1.7 percent, wages by 0.8 percent, and employment by 597,000 full-time equivalent jobs.

We estimate the proposals would increase the 10-year budget deficit by $3 trillion conventionally and $2.5 trillion dynamically. The debt-to-GDP ratio would increase from its long-run projected level of 201.2 percent to 223.1 percent on a conventional basis and 217 percent on a dynamic basis. Increased deficits and a higher debt load would require higher interest payments on the debt that would reduce American incomes as measured by GNP by almost 0.8 percent; the higher interest payments drive a wedge between the long-run effect on output of 0.8 percent and the long-run effect on GNP of -0.1 percent.

Overall, Trump has outlined significant tax proposals that would decrease after-tax income on average by 1.4 percent in 2025 and increase after-tax income by 2.2 percent in 2034. The difference between 2025 and 2034 is primarily because the TCJA provisions do not expire until 2026, and so extending them does not have an effect in 2025. On a long-run dynamic basis, we estimate that after-tax incomes would increase by 2.8 percent on average, reflecting the 0.8 percent increase in economic output under the plan.

Percentage Change in After-Tax Income Under Trump's Tax and Tariff Proposals​

Percentage Change in After-Tax Income by Income Group, Conventional, 2025 and 2034

2025
Conventional

2034
Conventional
−2.6%
−0.6%
−2.3%
−0.4%
−1.9%
0.3%
−1.2%
1.4%
−0.9%
1.7%
−1.2%
2.4%
−1.4%
4.2%
−1.8%
4.1%
0% - 20.0%
20.0% - 40.0%
40.0% - 60.0%
60.0% - 80.0%
80.0% - 90.0%
90.0% - 95.0%
95.0% - 99.0%
99.0% - 100%
Source: Tax Foundation General Equilibrium Model, October 2024.

However, the tax changes Trump has proposed would not be felt evenly across all income groups. In general, Trump has proposed tax cuts that provide a larger relative benefit to higher-income taxpayers, while his major proposed offset of higher import tariffs falls harder on lower- and middle-income taxpayers.

The Distribution of Trump's Tariff Hikes versus Tax Cuts​

Percentage Change in After-Tax Income by Income Group, Conventional, 2034

Tariffs,
2034

Tax
Cuts, 2034
−2.3%
1.7%
−2.2%
1.8%
−2.3%
2.6%
−2.3%
3.7%
−2.3%
4.0%
−2.3%
4.6%
−2.4%
6.5%
−2.1%
6.2%
0% - 20.0%
20.0% - 40.0%
40.0% - 60.0%
60.0% - 80.0%
80.0% - 90.0%
90.0% - 95.0%
95.0% - 99.0%
99.0% - 100%
Source: Tax Foundation General Equilibrium Model, October 2024.


In 2034, we estimate the bottom 40 percent of households would see tax increases, on average, with after tax income falling by 0.6 percent for the bottom quintile and by 0.4 percent for taxpa. Overall, Trump has outlined significant tax proposals that would decrease after-tax income on average by 1.4 percent in 2025 and increase after-tax income by 2.2 percent in 2034. The difference between 2025 and 2034 is primarily because the TCJA provisions do not expire until 2026, and so extending them does not have an effect in 2025. On a long-run dynamic basis, we estimate that after-tax incomes would increase by 2.8 percent on average, reflecting the 0.8 percent increase in economic output under the plan.

 

[Nihilus]

Yup this guy is a fed