Former President Donald Trump is considering implementing a new middle-class tax cut once he’s back in the Oval Office, according to two sources familiar with the ongoing discussions between Trump and his advisers.
One idea suggested by his advisers was a reduction to the federal payroll tax; however, this move will affect the flow of money to Social Security and Medicare, which will severely affect elderly Americans who rely on these services.
His economic team had advised this move in 2020 during the onslaught of the COVID-19 pandemic, but Trump settled for temporarily allowing deferrals in payroll tax payments.
Trump’s advisers also brought up suggestions, such as an increase in the standard deduction on year-end tax returns and a cut to the marginal income tax rate for middle-income earners.
The sources noted that these tax cut talks were still in the initial stages but focused on the middle class rather than households earning below a particular income level.
Moreover, this move will largely depend on the incoming Congress, as the lawmakers must approve a significant tax revamp, although minor tweaks on the tax code can be done through an executive order.
Among the people Trump consulted regarding tax reforms were Stephen Moore, a conservative economist, and Fox News’ Larry Kudlow.
Meanwhile, Trump’s campaign spokesperson, Karoline Leavitt, remarked, “When President Trump is back in the White House, he will advocate for more tax cuts for all Americans and reinvigorate America’s energy industry to bring down inflation, lower the cost of living, and pay down our debt.”
Before this, Trump had already expressed his plans to extend the Tax Cuts and Jobs Acts (TCJA), a 2017 tax policy he imposed that will reduce corporate and individual tax rates and increase family tax credits.
Recent Internal Revenue Service data proves that working-class people benefited the most from Trump’s tax cuts during his presidency.
According to the IRS data, the first year since the implementation of these tax cuts, it reduced average effective income tax rates for filers in every one of the IRS’s income brackets. The majority of its beneficiaries were lower- and middle-income households.
An example cited by the Heartland Institute was that filers with an adjusted gross income of $40,000 to $50,000 received an average tax cut of 18.2 percent.
Filers who earned $50,000 to $100,000 received a tax break of about 15 percent to 17 percent, and those earning $100,000 to $500,000 in adjusted gross income saw their income taxes cut by around 11 percent to 13 percent.
This tax reform resulted in an upward effect on economic mobility, meaning most middle-income and working-class earners had tax relief around twice the size of the cuts received by those who earned $1 million or more.
