So Trump is trying to get rid of tax on tips, overtime, and social security. And now it's coming out that his goal is to eventually eliminate income tax on anyone making under 150k. This sounds nothing like the talking point that he is only out to get tax breaks for the ultra wealthy.
Trump supporters, how do you square this?
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Westernhawk
Well-Known Member
Trump also said he'd "lower prices on day one."
Maybe just take a deep breath and see how many of his promises turn out to be true. His actual plan, which is well publicized on many websites dealing with economics and tax policy, is pretty clear about the top two tax brackets for now.
I'm not sure if that gets through the Elon algorithm on X, though.
Westernhawk
Well-Known Member
Yeah, as @Westernhawk stated, Trump has been proven over and over to be a serial liar, so what he says carries very little weight. For example, he has said no cuts to Medicaid, but he supports a House Bill that includes 100's of billions of $s worth of Medicaid cuts.
The no tax on tips thing is worth discussion, but it is probably a bad idea, and the situation (gratuity-based workers barely scraping by) would almost certainly be better addressed by eliminating the "tipped minimum wage." Numerous economists have made convincing arguments, and several natural experiments (several states have eliminated the tipped minimum wage) support these arguments. Also, eliminating income tax on tips would open doors for more tax evasion, as many in the service industry would change fee-based services to tip-based services to avoid taxation.
I don't know much about the notion of eliminating tax on overtime, other than it sounds like an enormous oversight burden. Beyond that, his prior statements do not lead one to believe that he actually has much concern for laborers working overtime:
Donald Trump’s Plan to Roll Back Overtime Protections
Project 2025 would undo Pres. Biden’s overtime protections, putting 4.3 million Americans at risk of losing thousands in overtime earnings» Sign up for our n...
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I also do not know much about eliminating taxes on social security. It seems kind of messed up that those are taxed at all, but I would guess most social security recipients pay little to no taxes unless they are also working or on the high-end of recipients, in which case perhaps it makes sense.
But regarding the effects of his tax policy proposal on the various income divisions, listen to the economist's take on tariffs I posted yesterday. Analysis of his proposed tariff plan (he is constantly revising it, so hard to pin anything down) suggests that most Americans will experience between a $1,200 - $2,000 per year cost of living increase due to the tariffs. His proposed tax plan would save $1,000 per year for the median household income. Thus, the median household and below lose out with his proposals.
The further you go down the income distribution ladder, the worse things get. Their savings will be even smaller because they already pay little to no tax, but the cost-of-living increases will persist. They will also be more greatly impacted by the degradation of services that are the natural result of the massive cuts to the federal workforce and entitlements, as they were often the recipients of these services. This will have a massive impact on poor children, in particular, who will have less access to healthcare and early educational enrichment, further entrenching them within their class and stifling the upward mobility that we think of as a hallmark of Americanism (that Horatio Alger story has always been harder than we pretend it to be, but these changes will make it significantly more difficult).
In contrast, the top1% of the income distribution stands to save about $70,000 per year with Trump's proposed tax plan, and their cost of living increase will be roughly the same as the median household. With tariff's being largely a consumption tax, those higher in the income brackets can avoid it by simply spending less and saving more. Those at the low end of the income brackets CANNOT do this because their income goes almost 100% to cost-of-living; that is, they spend only because they have to, and they do not have the option of simply spending less and saving more.
Hopefully that helps to explain why Trump's tariff/tax plans are considered regressive (have a bigger burden on the lower income brackets) by every single objective analysis.
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Maybe the decent news on the recent jobs report and consumer-price index will slow fears? Although, I would guess those are more lagging indicators, reflective of the economy Biden built, whereas the markets might be more leading indicators reacting to the chaos and uncertainty that Trump has unleashed. I still hold out hope that things will stabilize over the coming months if Trump's advisors can convince him to scale back his tariff plans in return for some meaningless concessions that can allow him to act like he won.
Westernhawk
Well-Known Member
Great, insightful post. Your post really brings it home. The tariffs will be something like a consumption tax, which will disproportionately affect the middle and lower classes. It's a regressive tax, of sorts. When one combines this with the degradation/destruction of the social safety net that may occur, things don't look good for people without means.Yeah, as @Westernhawk stated, Trump has been proven over and over to be a serial liar, so what he says carries very little weight. For example, he has said no cuts to Medicaid, but he supports a House Bill that includes 100's of billions of $s worth of Medicaid cuts.
The no tax on tips thing is worth discussion, but it is probably a bad idea, and the situation (gratuity-based workers barely scraping by) would almost certainly be better addressed by eliminating the "tipped minimum wage." Numerous economists have made convincing arguments, and several natural experiments (several states have eliminated the tipped minimum wage) support these arguments. Also, eliminating income tax on tips would open doors for more tax evasion, as many in the service industry would change fee-based services to tip-based services to avoid taxation.
I don't know much about the notion of eliminating tax on overtime, other than it sounds like an enormous oversight burden. Beyond that, his prior statements do not lead one to believe that he actually has much concern for laborers working overtime:
Donald Trump’s Plan to Roll Back Overtime Protections
Project 2025 would undo Pres. Biden’s overtime protections, putting 4.3 million Americans at risk of losing thousands in overtime earnings» Sign up for our n...
I also do not know much about eliminating taxes on social security. It seems kind of messed up that those are taxed at all, but I would guess most social security recipients pay little to no taxes unless they are also working or on the high-end of recipients, in which case perhaps it makes sense.
But regarding the effects of his tax policy proposal on the various income divisions, listen to the economist's take on tariffs I posted yesterday. Analysis of his proposed tariff plan (he is constantly revising it, so hard to pin anything down) suggests that most Americans will experience between a $1,200 - $2,000 per year cost of living due to the tariffs. His proposed tax plan would save $1,000 per year for the median household income. Thus, the median household and below lose out with his proposals.
The further you go down the income distribution ladder, the worse things get. Their savings will be even smaller because they already pay little to no tax, but the cost-of-living increases will persist. They will also be more greatly impacted by the degradation of services that are the natural result of the massive cuts to the federal workforce and entitlements, as they were often the recipients of these services. This will have a massive impact on poor children, in particular, who will have less access to healthcare and early educational enrichment, further entrenching them within their class and stifling the upward mobility that we think of as a hallmark of Americanism (that Horatio Alger story has always been harder than we pretend it to be, but these changes will make it significantly more difficult).
In contrast, the top1% of the income distribution stands to save about $70,000 per year with Trump's proposed tax plan, and their cost of living increase will be roughly the same as the median household. With tariff's being largely a consumption tax, those higher in the income brackets can avoid it by simply spending less and saving more. Those at the low end of the income brackets CANNOT do this because their income goes almost 100% to cost-of-living; that is, they spend only because they have to, and they do not have the option of simply spending less and saving more.
Hopefully that helps to explain why Trump's tariff/tax plans are considered regressive (have a bigger burden on the lower income brackets) by every single objective analysis.
The very wealthy, as you noted, will do even better than before. So, the income divide increases. I can feel the social unrest coming in the next few years.
It does make me wonder where this ends. I think AI, and the automation of white-collar jobs, will further income inequality. Beyond that, people derive value and meaning from their work, and if that disappears, even if it is replaced by a modest universal basic income, people are going to be pissed. What does the next major social revolution look like? Who is fighting it, and who is trying to crush it (and how)? Things can get very dark and dystopian really quickly when you start gaming it out.
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