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Fox News
4 days ago
- Business
- Fox News
Trump's tariff strategy could pay for his tax bill, but only if they stick, experts warn
The White House and congressional Republicans have said that President Donald Trump's sweeping tariffs would help pay for his mammoth tax bill, but tax experts say it depends on whether the president stays consistent. Senate Republicans are in the midst of hashing out their plan to tweak and reshape the president's "big, beautiful bill," which includes Trump's desire to extend and make permanent his first-term tax policies. However, the tax portion of the bill alone is expected to cost roughly $4 trillion. And when factoring in spending cuts and other revenue and economic drivers, the nonpartisan Congressional Budget Office found in a report earlier this week that, in all, the colossal legislative package would add $2.4 trillion to the deficit over the next decade. The CBO, which has come under recent scrutiny from congressional Republicans unhappy with the scoring of the president's "big, beautiful bill," also found that Trump's tariffs would reduce the deficit by $2.8 trillion over the same period. Joe Rosenberg, a senior fellow at the left-leaning Urban-Brookings Tax Policy Center, told Fox News Digital that the reconciliation package's potential impact on the debt is more concerning now than in 2017, due to higher debt levels and rising interest rates. When Republicans were putting together the president's original tax package, the national debt was roughly $20 trillion. Eight years later, that number has ballooned to over $36 trillion and counting. Rosenberg contended that if the CBO's report were taken as is, then Trump's tariffs would make the bill deficit neutral and then some. But the report assumed that the eye-popping sums that Trump's tariffs could generate were based on whether they were permanent. "I think what we've seen is that the tariff policy, again, seems to change day by day, hour by hour, minute by minute," he said. "And the administration is a little bit inconsistent about whether they view tariffs as purely a revenue source versus essentially a negotiating tool." The report also found that in exchange for trillions in deficit reduction, household wealth would drop, and the economy would shrink each year over the next decade. Tad Dehaven, a policy analyst at the Cato Institute, argued that this factor—along with Trump's tariffs being tied up in court over constitutional challenges and their shifting application—makes any projected benefits "extraordinarily unlikely." "Let's pretend that these tariffs are going to remain in place for 10 years at some level delineated today. That's a major tax increase, so whatever alleged benefit you're receiving from the tax cut in the reconciliation package, it's being offset by a tax increase," he said. "And a rather economically inefficient one." Mike Palicz, director of tax policy at the conservative Americans for Tax Reform, scoffed at the CBO's recent scoring, and lamented the agency as "a bunch of bean counters" that often miss the mark on key pieces of legislation, like the president's original Tax Cuts and Jobs Act. He argued that none of the outside noise should matter, telling Fox News Digital that "you cannot go out and explain to a normal person or business that their taxes aren't increasing next year if the Trump tax cuts are allowed to expire." "That's what the whole point of this exercise is, preventing the expiration of tax cuts, preventing the largest tax increase in American history," he said. "And no conservative, no Republican, should think that you address the deficit by raising taxes."
CNN
20-05-2025
- Business
- CNN
Who benefits most from the state and local tax deduction and why raising the cap is contentious
Source: CNN Increasing the $10,000 cap on the state and local tax deduction could benefit millions of tax filers. But a proposal to do just that has become a point of contention and a possible roadblock to House Republicans' passing 'one big, beautiful bill' that reflects President Donald Trump's agenda. That agenda includes making permanent essentially all of the individual income tax provisions from the 2017 Tax Cuts and Jobs Act, which are otherwise scheduled to expire this year. The SALT deduction, as it is known, enables federal income tax filers to deduct either their state and local income taxes or their state and local general sales taxes. In addition, they are also allowed to deduct their property taxes, assuming their income or sales taxes don't put them over the cap. The tax break, however, may only be taken by those who itemize deductions on their federal returns, which only a minority of filers do. Prior to 2017, there was no limit on the SALT deduction. But the TCJA imposed a $10,000 cap — which, when coupled with the expanded standard deduction under that tax law, meant the number of people who claimed the SALT deduction fell dramatically — from about one-quarter of filers in 2017, according to the Urban-Brookings Tax Policy Center, to less than 10% today. Going forward, it appears there will still be a cap, but it likely will be higher than $10,000. The question is just how much higher and for whom? The House Ways and Means and House Budget committees already approved a tax package that would permanently raise the cap to $30,000 for any taxpayer whose modified adjusted gross income is $400,000 or less if married filing jointly (and $200,000 or less for single filers). But anyone above those income thresholds would still be able to deduct at least $10,000, according to the Tax Foundation. The expectation, however, is that the cap will have to be higher than $30,000 to garner needed votes by a small group of House Republicans. Republicans introduced the cap as part of their 2017 tax cuts bill to help pay for the sweeping legislation. And they are hoping to use it again as a revenue raiser in this year's package. For example, the $30,000 cap proposal, which is expected to be amended before the House bill goes to the floor for a vote as early as Thursday, is estimated to raise $915.6 billion over 10 years relative to simply letting the cap expire as it is otherwise set to do if lawmakers don't act, according to estimates from the Joint Committee on Taxation. But GOP lawmakers from high-tax blue states, such as California and New York, are demanding greater relief for their constituents, who are disproportionately affected by the lower cap. This has sparked intraparty battles with their colleagues from lower-tax red states, whose residents don't benefit from the deduction nearly as much. It's hardly the first time SALT has been the subject of dispute in modern times, said tax historian Joe Thorndike. The SALT break has been on the books since 1913, when the federal income tax code was created. It also had a decade-long stint during the Civil War as well. But there have been efforts to limit the deduction over the past five decades. While originally the SALT deduction was created so that the federal government didn't encroach upon states' ability to collect revenue, SALT today is portrayed as a subsidy to high-tax states and as regressive in that it disproportionately benefits higher-income households, Thorndike noted. In 2020, the SALT deduction was claimed on just 8.6% of all federal tax returns, according to the Tax Policy Center. But the incidence of people claiming it was most concentrated in 13 states and the District of Columbia. The deduction was claimed on more than 20% of returns from Maryland and Washington, DC; and on 10% to 20% of returns filed by residents of California, Colorado, Connecticut, Georgia, Hawaii, Massachusetts, New Jersey, New York, Oregon, Utah, Virginia and Washington State. And those who have received the biggest break — both before and after the cap was imposed — are high-income filers, especially those in high-tax states and cities. In 2017, before the cap went into effect, for example, roughly two-thirds of the benefit went to those with incomes of $200,000 or more, according to the center. The average SALT deduction was about $13,000, but it topped $30,000 in eight counties, mostly in California and New York. While the vast majority of middle- and upper-income households received tax relief from TCJA regardless of where they lived, they would have received even more, had the cap not been instituted, said Howard Gleckman, a senior fellow at the TPC. For example, the tax cut for those in the top 20% would have been $2,500 larger, on average, had their state and local tax deductions not been limited, according to the center. Their average individual income tax cut was only about $6,200, instead of $8,700. The cap had an even greater impact on taxpayers in the top 1%, whose average tax cut was $40,100, instead of $71,000. But those in the bottom 80% would not have seen much of a change in the size of their tax cut had the cap not been put in place. See Full Web Article
Yahoo
17-05-2025
- Business
- Yahoo
House Republicans' bill includes ‘no tax on tips' proposal. How would it work?
House Republicans recently unveiled a sweeping tax plan that included a key promise from President Donald Trump's campaign trail: no tax on tips. Polling suggests it's a popular idea across party lines, and Trump has credited the idea for aiding his 2024 election win. But critics argue that no taxes on tips is a costly, unfair tax break that will benefit few lower-income Americans. 'A relatively small number of workers are going to see any significant tax savings from this proposal,' said Joseph Rosenberg, a senior fellow at the left-leaning Urban-Brookings Tax Policy Center. Here's what we know so far about the latest proposal. The bill would create a temporary tax deduction through 2028 for employees and independent contractors in occupations that 'traditionally and customarily received tips,' likely servers, for example. Should the bill pass, those occupations would be hashed out by the Treasury secretary. Highly compensated workers who make at least $160,000 in 2025 would be ineligible. Some tax policy experts have critiqued the idea because of its limited scope. Kyle Pomerleau, a senior fellow at the American Enterprise Institute, a center-right think tank, said it would be an unfair policy. For instance, why should a restaurant's tipped server have access to more tax breaks than the untipped chef working in the kitchen? 'It's good news for the workers out in Nevada, where there are a lot of tipped workers,' said Pomerleau. 'But you are isolating one segment of the population.' Even tipped workers may find themselves ineligible for the tax break. The proposed tax cut applies only to income taxes, not payroll taxes. That means the estimated 37% of tipped workers in the country who didn't make enough money to face federal income taxes in 2022 would see no benefits from this proposal, per an estimate from the Yale Budget Lab. "It is also going to do very little for workers, even that receive tips, at the low- to middle-part of the income distribution,' Rosenberg said. The Tax Policy Center last year found ending taxes on tips would benefit about 2% of all households, or 60% of households with tipped workers, with an average tax cut of about $1,800 per year. Rosenberg said the analysis has not been updated since the tax plan was unveiled on May 12, but he expects figures to be similar. Another 2024 analysis from the Yale Budget Lab had similar results, finding an estimated 4 million tipped workers – 2.5% of the total working population – would benefit from no taxes on tips. The average tax cut for families who benefit would be roughly $1,700, while the bottom fifth of earners would save $200. Overall, the tip provision is estimated to cost about $40 billion over four years, according to the Joint Committee on Taxation. It's a small fraction of the tax bill, which is estimated to add roughly $4 trillion to the deficit, but still a notable figure, according to Alex Muresianu, a senior policy analyst at the Tax Foundation, a center-right tax policy think tank. 'If you're going to drive a hole in the tax base for no reason, you'd rather that hole be the size of VW Bug instead of a semitruck,' he told USA TODAY. 'But at the end of the day, you're still driving a hole in the tax base.' Meanwhile, the GOP tax bill as a whole could cause low-income families to lose hundreds of dollars in after-tax income by cutting spending on programs like Medicaid and the Supplemental Nutrition Assistance Program, formerly known as food stamps, according to a new analysis from the Penn Wharton Budget Model. While the top 0.1% of earners would gain $389,280 on average next year, Americans making between $17,000 and $51,000 stand to lose $705 on average, according to the analysis first reported by The New York Times. Those with an income of less than $17,000 would lose more than $1,000 on average, with losses worsening over time. Americans could be squeezed further if the tax breaks have employers and workers lean more heavily on tips, exacerbating post-pandemic tipping fatigue. While the latest proposal has guardrails that would limit the ability to restructure pay, "certainly in tip-eligible industries there would be a tax incentive to shift income toward tax-exempt tips instead of taxable wages,' Rosenberg said. It's not yet clear what the final tax bill will look like. Hardline Republicans who wanted deeper spending cuts to Medicaid and a full repeal of green energy tax cuts blocked the measure Friday, despite Trump asking Republicans to "UNITE behind" the legislation in a social media post. The vote is likely a temporary setback, but it could delay plans for a vote by the full House, according to Reuters. This article originally appeared on USA TODAY: 'No tax on tips' included in GOP tax bill. How much will workers save? Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
