I’m an Economist: How a Trump Win in November Would Impact Middle Class Taxes
Written by
Angela Mae
Edited by
Rebekah Evans
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With the 2024 presidential election only a few months away, you wouldn’t be alone in wondering how things are going to play out. Political economists and individual Americans everywhere are watching the upcoming election with bated breath.
While there aren’t any guarantees of what’s to come or how it might impact the middle class — particularly as pertains to taxes — experts can still speculate. Some economists predict policy extensions, changes to taxation in middle-class America and a focus on economic growth if Donald Trump gets elected for a second term.
GOBankingRates spoke with Chuck Warren, political economist and host of the Political Podcast about what he believes could happen with a Trump win. Below is what he said.
Also see how another Trump presidency could affect the middle class, overall.
The TCJA Could Be Extended Even Further
It goes without saying that the next president is going to have a major impact on taxes in the country, but the effects could be further-reaching than people expect.
“I have kept a close eye on President Trump’s economic policies and their effect on different income groups,” Warren said. If Trump is given a second term, it could result in an extension of the TCJA — that is, the [e]xtension of Tax Cuts and Jobs Acts.
“One of the major policy achievements of President Trump’s first term was the 2017 Tax Cuts and Jobs Act,” he said. “This law brought substantial changes to the tax code.”
In particular, the TCJA reduced the corporate tax rate. While this primarily benefited shareholders who are also higher earners, there was also a limited time in which individuals — including those in the middle class — saw a cut in their marginal tax rates. These same individuals also saw an increase in their standard deductions, further reducing their tax liability.
“The TCJA has an expiration date in 2025, so [a re-elected Donald Trump] may want to make the provisions permanent instead,” Warren said. He also said it’s possible that Trump would widen the existing tax reductions, though only time will tell.
New Tax Reductions Could Be On the Horizon
If Trump’s elected for a second term, it could have an even greater effect on how the middle class is taxed in the future — beyond the TCJA. This is because, as Warren said, Trump has already expressed an interest in cutting taxes even more after being elected.
“These [tax changes] could include modifications of brackets, more deductions, or credits specifically aimed at reducing the tax burden on middle-income earners,” Warren said.
Whether or not this happens is something middle-class earners — and Americans in general — will have to wait to find out.
Deregulation and New Policies Could Spur Economic Growth
Even if Trump isn’t able to directly reduce the tax burden for middle class Americans, Warren predicted other positive changes will come into being.
In particular, he said that a second term could mean a greater emphasis on creating new policies that stimulate economic growth — something that’s always a key topic in American society — and benefit people in all income brackets.
“The administration also believes that its aim of creating policies that will spur up economic growth, such as deregulation and agreements for trade and incentives for investments, will result in high wages and job availability in the general economy,” he said. This would potentially help “families among these classes through increased disposable income even where there are limitations on changes on direct taxes.”
Of course, with every possible benefit comes a potential drawback as well.
Trump’s ambitious plans include placing a 60% tariff on Chinese goods and 10% on all other global trading partners. This, combined with other potential changes that could come with his second presidency, could have a greater impact on inflation. And with that comes the concern for how far middle-class Americans’ income will take them — tax cuts or no tax cuts.
Other Indirect Changes Could Affect Taxes, Too
Other changes in policies and regulations could also play a key role in middle-class Americans’ financial stability. But again, exactly how great of an effect these changes will have on the average individual is as yet uncertain.
“Besides direct tax policies, the government’s regulatory stance can also affect the financial well-being of average American households,” Warren said. “For example, changes in healthcare policies, housing regulations [and] educational funding may have far-reaching implications concerning the level of disposable incomes and broad financial security considerations.”
Warren didn’t elaborate on this point further, but it may be possible to speculate based on Trump’s campaign policies and past trends.
Regarding healthcare, Trump said earlier this year, “We’re going to fight for much better health care than Obamacare. Obamacare is a catastrophe.”
Back when Trump was elected as president for the first time, he also swore not to cut key social programs like Medicare, Social Security and Medicaid. Today, however, there have been calls for some significant cuts to Social Security and price hikes for Medicare. This has led to some experts questioning the validity of these plans and the way they skew more heavily toward wealthy investors rather than the middle class.
Ultimately, the experts can speculate and make predictions based on past trends and calls for future policy changes. But when it comes down to it, only time will tell how a Trump win will truly affect middle class taxes.
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