CNN
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Donald Trump dangled before voters a proposal that many Republican candidates have made in the past.
“If you vote for me, I’ll cut your taxes,” the former president told an audience in New York this week.
But the exact tax cuts Trump plans to implement will depend on whose support he is seeking.
In Nevada, a purple state that hinges on the votes of the blackjack dealers, servers and hotel workers who keep Las Vegas running, Trump has vowed to repeal the federal tax on tips. For people over 65, the country’s most reliable voting bloc, Trump offered another incentive: “Seniors shouldn’t pay taxes on Social Security!” he wrote on social media. For blue-collar workers, whom his campaign is aggressively pursuing, Trump vowed this month to repeal taxes on overtime pay.
“It’s time for working men and women to finally get a break, and we’re doing that,” Trump said in Tucson, Arizona, specifically naming police officers, nurses, construction workers and other skilled workers as those who would benefit.
And he argued that his latest proposal – expanding the deduction for people who pay the most in state and local taxes – would “save residents thousands of dollars” not only in his former home state of New York, which he claims he can win, but also in Pennsylvania, the hottest battleground state in the 2024 election.
The tax cuts he promised would add up to trillions of dollars.
In his third presidential run, Trump has sought to simplify the party’s message to appeal to more working-class voters. The stripped-down platform his campaign pushed through the GOP at its convention in Milwaukee in July replaced GOP bedrock orthodoxy, including deficit reduction, and lengthy policy statements with catchy slogans like “no tax on tips” and “make America affordable again.”
Mr. Trump’s tax proposal has already been prepared for display on campaign bills and in television ads airing in battleground states, and a Trump-aligned super PAC has even made “No Tax on Tips” stickers for supporters to distribute on restaurant bills.
But while President Trump’s promised set of focused but vague tax cuts may sound good to some voters, the lack of details makes it hard to know exactly who would benefit.
The measures would also put a huge strain on the federal budget, possibly straining Social Security and Medicare. Trump has not said how he would pay for the tax cuts, other than pointing to the tariffs, which he claims would bring in trillions of dollars in revenue, but some experts say even that would still not cover all of Trump’s campaign promises.
“What we have here is what I call ultra-targeted,” said Howard Gleckman, a senior fellow at the nonpartisan Urban-Brookings Tax Policy Center, pointing to the contrast between the Republican candidates’ recent pledges and the broad, relatively detailed tax package Trump laid out during his 2016 presidential campaign. “You can almost see the focus groups that were behind these proposals.”
Trump’s proposal speaks directly to Americans still shocked by soaring inflation, and comes with a promise to put more money in people’s pockets if he returns to office. Lingering fears about prices and wages are a top concern for many heading into the election, which plays to Trump’s advantage: Polls show most voters say he is better suited to manage the economy than Vice President Kamala Harris.
But the gap in support between Trump and his Democratic rivals on economic issues has narrowed since Harris was selected as the nominee to replace President Joe Biden. Like Trump, Harris has offered a series of populist economic proposals, including her own pledge to repeal the federal tax on tips. Trump has accused Harris of imitating him.
Meanwhile, the Vice President is pushing for targeted tax credits and deductions to provide relief to certain Americans. To help families struggling with child care costs, she has proposed expanding the popular child tax credit in the American Rescue Plan from $2,000 to $3,600 per year and called for making it permanent. Additionally, she wants to create a $6,000 child tax credit for families with newborns.
Harris’ plan would provide up to $25,000 in down payment assistance to prospective homebuyers and a $10,000 tax credit for first-time homebuyers. She also proposes increasing the tax credit for new small businesses from $5,000 to $50,000.
The former president launched his tax cut campaign at a rally in Nevada in June, pledging to abolish the tip tax.
But the proposal may not make much sense because some tipped workers make too little to pay federal income tax. About 60% of households with tipped workers would benefit, with the average tax cut being about $1,800, according to the Tax Policy Center.
If Trump also eliminates the payroll taxes that support Social Security and Medicare, nearly all tipped workers would get a tax cut — bringing their average combined income and payroll tax bill to more than $2,100, according to the Tax Policy Center — but it would reduce the Social Security benefits they receive when they retire.
What’s more, eliminating the tip tax would hit the federal budget hard, costing it $150 billion to $250 billion in lost revenue over 10 years, according to the Committee for a Responsible Federal Budget, a watchdog group.
Seniors are next on the list: Trump announced in late July that if he were elected, Social Security recipients would no longer have to pay taxes on their benefits.
The measure will benefit many seniors, at least initially. According to the Tax Policy Center, U.S. households will see an average tax cut of $550, with the amount varying widely by income level. But low-income seniors will see little or no change because their Social Security benefits are not taxed. Middle- and upper-middle-income households will see the biggest benefits, with the largest increases expected as a percentage of after-tax income.
But eliminating the tax would weaken both the already financially precarious Social Security and Medicare trust funds. According to the Committee on Budget Responsibility, the Social Security Retirement Trust Fund would run out more than a year sooner, and the Medicare Hospital Insurance Trust Fund would run out six years sooner. If the trust funds were depleted, the benefit programs would be unable to pay benefits in full. Seniors whose payment reductions exceed their tax savings would lose out, with low-income beneficiaries suffering the most.
The committee’s analysis also found that repealing the tax would increase the federal deficit by $1.6 trillion to $1.8 trillion by 2035.
Earlier this month, President Trump announced he would eliminate taxes on overtime pay, a move that would be a boost for hourly and some salaried workers. However, with details still scarce, it’s unclear who would benefit and how much the tax savings would be. However, the right-leaning Tax Foundation estimates that eliminating federal income taxes on all overtime pay could cost $680 billion over 10 years. Meanwhile, eliminating both income and payroll taxes would increase the cost to $1.1 trillion.
Most recently, before a rally in New York, President Trump announced on Truth Social that he would eliminate the $10,000 cap on state and local tax (SALT) deductions that he signed into law as part of the Tax Cuts and Jobs Act of 2017. The limit disproportionately affects higher-income earners who live in high-tax, Democratic-leaning states and who itemize their deductions.
According to the Committee for a Responsible Federal Budget, removing the cap would increase the cost of extending the Tax Cuts and Jobs Act of 2017 by $1.2 trillion over 10 years. The committee called such a measure “costly, distortionary, and regressive.” About 92% of the tax cuts would go to the top 10% of households, while less than 1% would go to the bottom 60%.
Trump’s commitment to economic populism goes beyond tax cuts. At a rally in New York, he promised to temporarily cap credit card interest rates at 10% “until working Americans catch up.” The average interest rate on a credit card is just under 21%, while the average interest rate on a retail card is at a record high of 30.45%. Credit card debt has topped $1 trillion, and more people are falling behind on their payments.
But the conservative Heritage Foundation does not support caps on credit card interest rates, likening it to “price controls” – a term President Trump used to criticize Governor Harris’ proposal to ban companies from price gouging.
Whether those proposals will become law remains in doubt, as they will require approval from a Congress that is likely to remain divided even after the November election.
Trump told an audience in Nevada that he would eliminate taxes on tipped wages on his first day in office, an unrealistic timeline his campaign later backtracked.
“President Trump will ask Congress to repeal the tip tax,” spokeswoman Caroline Leavitt told CNN in June.
