Trump and Musk Could Save Billions Under New Tax Plans — Will the Middle Class Pick Up the Tab?
Written by
Kerra Bolton
Edited by
Amber Barkley
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Billionaires like President Donald Trump and Elon Musk could save billions under Republican tax proposals recently advanced by Congress.
The budget resolution paves the way to extend the 2017 Trump tax cuts and add new breaks that largely benefit the wealthy — such as eliminating estate taxes, slashing capital gains rates and reducing corporate taxes.
While some middle-class tax relief is included, some government watchdogs warn that the bulk of benefits favor the rich, potentially shifting the nation’s tax burden downward.
Billionaire Tax Savings
The Republican proposal aims to extend and expand Trump’s signature 2017 tax cuts from his first term, which already provided significant tax reductions.
According to a report by Americans for Tax Fairness, the new tax cuts would create trillions in debt, threaten public education, healthcare and housing funding, and widen the income gap.
Extending the 2017 Tax Cuts and Jobs Act (TCJA) could also save Trump at least $2.7 million over ten years and Elon Musk up to $50 million in the same period.
Additionally, efforts to repeal the federal estate tax could result in savings of about $2 billion for Trump’s heirs and up to $132 billion for Musk’s family.
Middle-Class Impact
Proponents said Americans could face tax increases totaling trillions of dollars if Congress doesn’t extend the president’s tax cuts.
However, Wayne Winegarden, an economist at the Pacific Research Institute, said that might be oversimplifying things. For example, Winegarden said the planned tax increase is not an increase but a change from the current baseline.
“But from an individual’s perspective, things look different,” Winegarden said. “This year, my tax rate was 37% and next year — assuming the current baseline tax changes occur — it will increase to 39.6%. Therefore, taxes are set to increase.
“Extending the current rates is not a tax cut for the individual. It is a continuation of their current tax rates.”
Upper-Class Impact
While the Republican tax plan affects a broad range of taxpayers, an analysis from the Center on Budget and Policy Priorities indicated that households with incomes in the top 5%, who have incomes over around $320,000, would receive nearly half of the net benefits from extending the tax cuts.
The budget framework proposed eliminating federal taxes on tipped wages and Social Security, which sounds like middle-class tax relief, but it isn’t.
For example, researchers from the Tax Policy Center found that nearly half of the tax benefits from excluding tips from federal wages would flow to the top 40% of taxpayers. In addition, the Peterson Foundation found that “excluding tips from individual income taxes would provide little to no benefits for low-income tipped workers” because many of them pay little to no income tax due to low earnings.
In addition, the budget resolution included provisions to repeal the federal estate tax, which applies to estates exceeding $13.6 million for individuals and $27.2 million for couples.
Eliminating it would result in substantial tax savings for the wealthiest families.
The Congressional Republican proposed framework for extending and expanding the 2017 tax cuts is projected to reduce federal tax revenue by $5 trillion and add $5.7 trillion in federal debt over a decade, Reuters reported.
Broader Economic Implications
“Most taxpayers will see an increase in tax rates if they are allowed to expire,” Winegarden said. “When coupled with the tariffs, average families would see a very large tax increase. This would be bad for the economy, as well, and runs the risk of causing or worsening a recession.”
In addition, Winegarden said that narrowly emphasizing the proposal’s tax implications on the wealthy is shortsighted.
“Wealth inequality is focusing on the wrong question,” Winegarden said. “The important question is how to grow incomes and wealth for all families, especially lower income families.
“Allowing a significant tax increase to occur will harm the income growth ability for lower income families, which is why it should be avoided.”
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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