How Cost of Living Could Skyrocket if Trump Wins In November
Written by
Dawn Allcot
Edited by
Cory Dudak
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Americans have been grappling with inflation since pandemic. Factory shut-downs created supply chain issues. Plus, increased demand for consumer goods resulting from stimulus funds and “revenge spending,” along with the government printing money to help cover the deficit, dramatically reduced the value of the U.S. dollar and led to inflation rates as high as 9.1% in June 2022.
In recent months, the U.S. has seen some inflation relief, with rates slowing to just 2.4%. But, if Donald Trump is elected U.S. president in November, some of his policies could spark increased inflation which last ran amok due to the pandemic. They could also increase the national deficit, according to the findings of several new studies.
The nonpartisan Committee for a Responsible Federal Budget discovered that Trump’s proposed fiscal policies could add between $7.5 trillion and $15.2 trillion onto national debt. Kamala Harris’ plans would also increase the national debt, but only by an estimated $3.5 trillion over the next 10 years, according to the report.
According to The New York Times, “Trump’s plans could increase U.S. debt while raising costs for most Americans. A new analysis finds that Vice President Kamala Harris and former President Donald J. Trump’s plans would both add to the deficit, but Mr. Trump’s proposals could create a fiscal hole twice as big.”
“It’s almost difficult to come up with a tax plan that would raise taxes on most Americans, but still increase the deficit by hundreds of billions of dollars a year — and that’s what this does,” Steve Wamhoff, the federal policy director at the Institute on Taxation and Economic Policy, told The New York Times.
The ITEP analyzed the effects Trump’s proposed tax and tariff plans to determine how they would affect the wallets of most Americans. Let’s look at a few reasons why the cost-of-living may go up for many Americans if Trump once again takes office.
Reduced After-Tax Income for All But the Wealthiest Americans
The Tax Foundation projected that Trump’s proposed tax cuts — which include eliminating income tax on tips and overtime pay, extending the Tax Cuts and Jobs Act, and reducing the corporate tax rate to 15% — could lead to as much as $7.8 trillion in lost revenue for the federal government. While tax cuts across the board may seem like a positive step on the surface, the ITEP projected the plan would lead to a tax increase for all but the top 5% of highest earning Americanss. Likewise, the Tax Foundation showed that by 2034 (with Trump’s projected changes in effect), the wealthiest 1% of Americans would bring home 4.1% more in after-tax income, while the bottom 40% would have a loss of up to 0.6% in after-tax income.
In the short-term, Trump’s proposed plans would reduce after-tax income by an average of 1.4% in 2025, with the bottom 80% of earners being hit the hardest, with losses from 1.2% to 2.6%, according to The Tax Foundation.
Rising Deficit Could Spark Inflation
In an article from spring 2024, before the U.S. Federal Reserve began cutting interest rates, The New York Times wrote that a high deficit could increase demand for goods and services, and also set consumer expectations that inflation will continue. This can lead to increased spending now, which is one driver for inflation.
If Trump increases the deficit through tax breaks, it’s likely to spark spending that could lead to increased inflation yet again.
Widespread Tariffs on Imports
Lastly, and perhaps most importantly, Trump’s proposed tariffs on imported items, from clothing to microchips, could dramatically increase the cost of consumer goods. Trump’s plans include scenarios where the U.S. places a 20% tariff on all imports, or tariffs as high as 60% on goods coming from China, according to The New York Times.
These tariffs could disproportionately affect low-earners, who spend a higher percentage of their income on imported clothing, groceries and consumer items.
Final Note
Both Trump and Harris have proposed plans that would increase the U.S. deficit and reduce taxes for some Americans. It’s important to review both candidates’ track records on taxes and the economy before making a decision at the polls.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. For more coverage on this topic, please check out How Cost of Living Could Get Worse Under Both Harris and Trump.
More From GOBankingRates
