If you are poor or middle-class, expect your effective tax burden to go up under another Trump presidency.
Yes, up.
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That’s according to a new analysis from the Peterson Institute for International Economics (PIIE) assessing the winners and losers of Donald Trump’s tax agenda, including not only his income tax breaks but also his tariffs (that is, import taxes). Most people come out behind; only the highest-earners come out ahead.
Trump passed a major tax code overhaul in 2017, which lowered both corporate and personal income tax rates. The biggest benefits of this law went to the wealthiest households, both in dollar terms and as a share of their incomes, the Tax Policy Center calculates. Even so, nearly every U.S. household benefited, at least for the first few years.
Come 2025, most of Trump’s personal-income tax cuts will expire. In a second term, the presumptive Republican nominee has pledged to extend all of them (plus slash the corporate rate even further). This would lead to lower taxes for most Americans.
But these are not the only tax-related changes Trump has proposed. He has also pledged a 10 percent universal tariff on all products from every country around the world, whether friend or foe, plus a 60 percent (or higher) tariff on Chinese-made goods.
In the PIIE paper, scholars Kimberly A. Clausing and Mary E. Lovely estimate the expected costs of those import taxes based on what we know about Trump’s previous rounds of tariffs and who ultimately bore their cost. Despite Trump’s claims that other countries “paid for” tariffs, reams of research have found that his prior tariffs (on Chinese goods, global steel and aluminum, washing machines, etc.) were passed along mostly or entirely to Americans, in the form of higher prices.
http://www.washingtonpost.com/opini...c_magnet-op2024elections_inline_collection_19
Drawing on those studies, Clausing and Lovely project Trump’s additional proposed tariffs would cost the median household at least $1,700 in taxes each year. The pain varies throughout the income distribution, however.
Tariffs disproportionately burden lower-income households, which tend to spend a larger share of their income than richer households do. That is, import duties, including Trump’s, are generally regressive. In fact, the costs to lower- and middle-income Americans are so great that they would more than offset the benefits of Trump’s 2017 tax cut extensions.
For example, for those in the lowest income quintile, extending the 2017 tax changes would raise their incomes by a teeny bit (0.5 percent), but their tariff burden (4.2 percent of their incomes) would easily erase those savings. So, on net, their incomes would fall by about 3.7 percent.
Those in the top 1 percent, by contrast, would enjoy the biggest benefits of Trump’s 2017 income tax extensions, with a healthy income boost of about 2.3 percent. They also buy imported goods, of course, so they would also be hurt by import taxes, but not nearly as much as their poorer neighbors. The tariffs shave “only” 0.9 percent off their incomes. On net, their incomes would grow by about 1.4 percent. (For someone at the threshold of the 99th percentile, that amounts to an annual bonus of roughly $8,000, courtesy of Trump.)
These are relatively conservative estimates of how regressive Trump’s tax agenda would be. They exclude some things that might make the picture even worse. For example, they ignore Trump’s business tax provisions, which would also disproportionately benefit high-income people.
The tariff estimates also don’t include the costs of any possible retaliation from other countries. But we should probably expect retaliation, given how many countries imposed counter-tariffs last time, plus some recent rumblings from our European allies. Any retaliation would cause more pain for Americans, as it did before. Research on Trump’s earlier trade wars found that, though they did nothing to boost employment in his favored U.S. industries, they did kill a lot of jobs in sectors targeted by counter-tariffs (especially agriculture).
The PIIE study also doesn’t account for some other regressive parts of Trump’s fiscal agenda, such as repealing Obamacare. Doing so would eliminate tax subsidies for individual insurance plans (which would also hurt lower- and middle-income Americans) and scrap an investment tax (again, disproportionately helping the wealthy).
How does all this compare with President Biden’s tax agenda? There is overlap. Biden has pledged to extend most of the Trump-era income tax cuts, and he recently levied some new tariffs against China. But Biden would raise taxes on high earners. And though I’m no fan of Biden’s new tariffs, his are more limited. They cover less than 1 percent of the trade that Trump’s tariff plans target, so the costs to downstream consumers are much smaller.
In polls, Americans generally say Trump would be better for their own finances than a second Biden administration. In some ways this is understandable: The pre-covid economy under Trump was very good. Today, under Biden, inflation has taken a big bite out of people’s paychecks.
But while presidents have limited control over most macroeconomic conditions, they do have greater power over taxes. On that measure, voters might rethink who’s better for their pocketbooks.
Yes, up.
Sign up for Democracy, Refreshed, a newsletter series on how to renovate the republic.
That’s according to a new analysis from the Peterson Institute for International Economics (PIIE) assessing the winners and losers of Donald Trump’s tax agenda, including not only his income tax breaks but also his tariffs (that is, import taxes). Most people come out behind; only the highest-earners come out ahead.
Trump passed a major tax code overhaul in 2017, which lowered both corporate and personal income tax rates. The biggest benefits of this law went to the wealthiest households, both in dollar terms and as a share of their incomes, the Tax Policy Center calculates. Even so, nearly every U.S. household benefited, at least for the first few years.
Come 2025, most of Trump’s personal-income tax cuts will expire. In a second term, the presumptive Republican nominee has pledged to extend all of them (plus slash the corporate rate even further). This would lead to lower taxes for most Americans.
But these are not the only tax-related changes Trump has proposed. He has also pledged a 10 percent universal tariff on all products from every country around the world, whether friend or foe, plus a 60 percent (or higher) tariff on Chinese-made goods.
In the PIIE paper, scholars Kimberly A. Clausing and Mary E. Lovely estimate the expected costs of those import taxes based on what we know about Trump’s previous rounds of tariffs and who ultimately bore their cost. Despite Trump’s claims that other countries “paid for” tariffs, reams of research have found that his prior tariffs (on Chinese goods, global steel and aluminum, washing machines, etc.) were passed along mostly or entirely to Americans, in the form of higher prices.
http://www.washingtonpost.com/opini...c_magnet-op2024elections_inline_collection_19
Drawing on those studies, Clausing and Lovely project Trump’s additional proposed tariffs would cost the median household at least $1,700 in taxes each year. The pain varies throughout the income distribution, however.
Tariffs disproportionately burden lower-income households, which tend to spend a larger share of their income than richer households do. That is, import duties, including Trump’s, are generally regressive. In fact, the costs to lower- and middle-income Americans are so great that they would more than offset the benefits of Trump’s 2017 tax cut extensions.
For example, for those in the lowest income quintile, extending the 2017 tax changes would raise their incomes by a teeny bit (0.5 percent), but their tariff burden (4.2 percent of their incomes) would easily erase those savings. So, on net, their incomes would fall by about 3.7 percent.
Those in the top 1 percent, by contrast, would enjoy the biggest benefits of Trump’s 2017 income tax extensions, with a healthy income boost of about 2.3 percent. They also buy imported goods, of course, so they would also be hurt by import taxes, but not nearly as much as their poorer neighbors. The tariffs shave “only” 0.9 percent off their incomes. On net, their incomes would grow by about 1.4 percent. (For someone at the threshold of the 99th percentile, that amounts to an annual bonus of roughly $8,000, courtesy of Trump.)
These are relatively conservative estimates of how regressive Trump’s tax agenda would be. They exclude some things that might make the picture even worse. For example, they ignore Trump’s business tax provisions, which would also disproportionately benefit high-income people.
The tariff estimates also don’t include the costs of any possible retaliation from other countries. But we should probably expect retaliation, given how many countries imposed counter-tariffs last time, plus some recent rumblings from our European allies. Any retaliation would cause more pain for Americans, as it did before. Research on Trump’s earlier trade wars found that, though they did nothing to boost employment in his favored U.S. industries, they did kill a lot of jobs in sectors targeted by counter-tariffs (especially agriculture).
The PIIE study also doesn’t account for some other regressive parts of Trump’s fiscal agenda, such as repealing Obamacare. Doing so would eliminate tax subsidies for individual insurance plans (which would also hurt lower- and middle-income Americans) and scrap an investment tax (again, disproportionately helping the wealthy).
How does all this compare with President Biden’s tax agenda? There is overlap. Biden has pledged to extend most of the Trump-era income tax cuts, and he recently levied some new tariffs against China. But Biden would raise taxes on high earners. And though I’m no fan of Biden’s new tariffs, his are more limited. They cover less than 1 percent of the trade that Trump’s tariff plans target, so the costs to downstream consumers are much smaller.
In polls, Americans generally say Trump would be better for their own finances than a second Biden administration. In some ways this is understandable: The pre-covid economy under Trump was very good. Today, under Biden, inflation has taken a big bite out of people’s paychecks.
But while presidents have limited control over most macroeconomic conditions, they do have greater power over taxes. On that measure, voters might rethink who’s better for their pocketbooks.
