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One of the defining features of Donald Trump’s presidential campaign was the promise of massive tax cuts for the wealthy, the working class, and businesses alike.
Now it is up to congressional Republicans to decide which of those cutbacks to submit as legislation. To pay for the cuts, they have begun to set fundraising goals. Among them are cuts to benefits for single moms and low-income persons who rely on government healthcare.
The measures are part of a menu of tax and expenditure cuts released by House Republicans this month. It remains to be seen whether Republicans will put any of these ideas into action. Some potential targets include popular tax advantages, and reduction could be politically risky. Furthermore, lowering taxes on the rich could harm Trump’s populist image.
For the ultrawealthy, the document proposes removing the federal estate tax, which is expected to cost the government $370 billion in revenue over the next decade. The tax, which assesses a percentage of a person’s inheritance after death, applies exclusively to estates valued more than $14 million.
According to estimates from the Tax Policy Center research tank, approximately 30% of the tax is paid by the top 0.1% of income earners. (Many ultra-wealthy individuals already dodge the tax. As ProPublica previously reported, attorneys and accountants have created ways to bequeath fortunes to heirs tax-free throughout the years, typically through the use of intricate trust structures.
Another proposal proposes to reduce the top corporate tax rate by about a third.
Trump pledged such a cut during his campaign. But Vice President JD Vance spoke out against it before Trump chose him as his running mate. “We’re sort of in line with the OECD right now,” he remarked in an interview last year, referring to the Organization for Economic Cooperation and Development, which is made up of 38 wealthy industrialized countries. “I don’t think we need to be cutting the corporate tax rate further.”
During Trump’s first term, he reduced the top corporation rate from 35% to 21%, where it is presently, moving the United States from a high rate compared to other OECD countries to roughly average. The planned 15% drop would put the United States among the countries with the lowest rates.
To pay for significant tax cuts, the House Republicans’ proposal includes a number of prospective federal program overhauls. One significant focus is on prospective changes to Medicaid, the state-run health-care program for low-income people. The Affordable Care Act, signed into law by President Barack Obama, included Medicaid expansion as a fundamental provision. Many Republican governors originally declined to take advantage of the increased federal subsidies to extend the program. In the subsequent years, numerous states reversed course, and the program has increased the number of Medicaid enrollees by more than 20 million as of last year.
The memo proposes severe changes to the program, including reducing state reimbursements. According to a health policy organization, states would need to “raise new revenues or reduce Medicaid spending by eliminating coverage for some people, covering fewer services, and (or) cutting rates paid to physicians, hospitals, and nursing homes,” according to a study.
Trump’s opinion on Medicaid has been contradictory over time. During his first tenure, he wanted to reduce the program. However, he has also made pronouncements about protecting it over the years.
Trump stated at a 2023 campaign event that “we’re not going to play around with Medicare, Medicaid.” However, it’s unclear whether the comment was a throwaway: While Trump has focused on retaining Medicare, the program that covers health care for the elderly, he has not prioritized Medicaid. The official GOP platform unveiled by Trump last year, for example, guaranteed not to reduce “one penny” from Medicare while remaining silent on Medicaid. During the campaign last year, Trump appeared to support cutbacks to “entitlements” when asked about Medicare, Medicaid, and Social Security.
Other suggestions would end tax advantages for families with children.
Parents can already claim a $2,100 tax credit for child care expenses. The House Republican plan calls for the elimination of that break. The cut is expected to save $55 billion over a decade.
Vance, in particular, pledged economic initiatives that would reduce the burden on parents. “It is the task of our government to make it easier for young moms and dads to afford to have kids,” as he stated last week. (He ran on a platform to more than treble the child tax credit.)
Another proposal on the list of choices is aimed directly at single-parent families. The measure would abolish the “head of household” filing classification in order to collect about $200 billion in additional taxes from single parents and other individuals who care for dependents on their own during the next decade.
The “head of household” title was formed in the 1950s with the idea that single parents should face a lower tax burden. Eliminating it would hurt millions of Americans, primarily women. (According to a Tax Foundation research, persons with incomes between the 20th and 80th percentiles, or those earning between $14,000 and $100,000, would see the greatest drop in after-tax earnings.)
Democrats have slammed the proposals as a favor for the wealthy at the price of the working class. “Republicans are gearing up for a class war against everyday families in America,” said Sen. Ron Wyden, D-Ore.
A White House representative did not reply to inquiries regarding the specifics of the House GOP memo, but did state in an email that “This is an active negotiation and process in which the President and his team are working productively with Congress.” His visit to the House Retreat [Monday] demonstrated that he wants to prioritize unity and a good agreement for Americans that fulfills his campaign pledges.”
A representative for the House Budget Committee declined to answer specific queries, saying only that “this is a menu of policy options for authorizing committees to consider as members navigate the reconciliation process.”
Some of the initiatives would meet Trump’s campaign promises aimed at the working class.
The proposal includes a plan to eliminate income taxes (but keep payroll taxes) on tips, at a cost of $106 billion over ten years. Trump highlighted the notion while campaigning in Las Vegas, hoping to get support from the city’s large concentration of service workers. Trump’s Democratic opponent, former Vice President Kamala Harris, later promised to do the same. Economists have challenged the proposal as unjustly favoring one group of working-class employees over others who are paid the same but work in businesses that do not accept gratuities.
Another Trump campaign promise listed in the document is to eliminate overtime pay taxes, which would cost $750 billion over ten years. Tax experts have also slammed the concept as an ineffective approach to provide assistance for lower-wage workers who qualify for overtime because they are paid hourly and perform repetitive activities. Critics argue that the provision encourages gaming and complicates tax filing by imposing new reporting requirements on taxpayers’ hours worked.
One of the most significant measures to generate new money in the House Republicans’ manifesto would eliminate a tax advantage popular among upper-income Americans: the mortgage interest deduction. The document calculates that eliminating the break would save $1 trillion over ten years. According to the Tax Foundation, Americans earning more than $200,000 per year receive an estimated 60% of the value of this deduction due to a complicated interplay of various tax code provisions.
Eliminating the mortgage interest deduction would have an unequal geographic impact: assessments show that the tax advantage is more useful to Americans in Democratic-dominated states like California, Massachusetts, and New Jersey.
