Non-Defense Spending Insufficient to Cover Costs
Even if Congress were to eliminate every dollar of non-defense discretionary spending over the next decade, it wouldn’t be enough to offset the anticipated cost of the broad-ranging tax cuts that Trump and Vance have proposed.
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The projected expense highlights the difficulties in balancing such a massive tax reduction plan with current federal spending levels. Without detailed policy plans, the estimates come from initial evaluations by tax and budget experts.
Campaign Promises on Financing
In a statement, the Trump campaign claimed that cutting wasteful spending and increasing energy production would generate enough revenue to pay for the tax cuts and simultaneously lower the national debt.
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However, no further details were provided on how these measures would be implemented or the specific areas where savings would occur. The lack of clarity raises questions about the feasibility of funding such large tax cuts without drastic spending reductions.
Harris’ Approach to Tax Policy
In contrast to Trump’s tax proposals, Democratic Vice President Kamala Harris has also suggested tax cuts, though on a smaller scale. She has proposed exempting tips from taxation and expanding the child tax credit, policies that would have a less significant impact on the federal budget.
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One think tank estimates the cost of her proposals at approximately $2 trillion, which Harris plans to offset by raising taxes on corporations and high-income individuals.
Harris’ Additional Policy Proposals
Harris continues to unveil policy ideas gradually, potentially adding to the cost of her plans. Recently, she called for an expanded deduction for start-up businesses and proposed raising the capital gains tax rate from 20% to 28%, measures designed to increase federal revenue.
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These incremental proposals reflect her campaign’s strategy of offering detailed policy solutions to balance the tax cuts she advocates.
Trump’s Tax Cuts Face Legislative Hurdles
The sheer size of Trump’s tax proposals makes it unlikely that they would all pass, even in a Congress controlled by Republicans. Among the proposed cuts are extensions of Trump’s 2017 tax cuts, significant increases to the child tax credit, and exemptions for tips and Social Security payments.
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Experts like Kyle Pomerleau of the American Enterprise Institute assert that Congress is not likely to approve such a massive deficit-financed tax cut.
Economic Impact of Tax Cuts Uncertain
While Republicans have long maintained that tax cuts stimulate economic growth, the impact of Trump’s proposals remains uncertain. Many of his proposed cuts focus on reducing taxes for individuals rather than businesses, which may not generate the same level of economic activity.
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The cost of these plans is so vast that it could force Congress to eliminate major federal agencies if spending were to remain flat.
Risks of Eliminating Major Federal Programs
If Trump’s tax cuts were enacted, funding would only cover the military, federal benefits like Social Security, and debt interest payments, leaving little room for anything else.
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Essential government services, including law enforcement, border security, and air traffic control, could be drastically reduced or eliminated. This prospect raises concerns about the broader implications for public safety and governance.
Campaign Styles and Policy Details
Trump’s supporters are accustomed to his spontaneous, broad policy announcements, while some Democratic constituencies demand detailed plans with clear cost offsets.
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Harris and President Joe Biden have released a budget proposal to cut the federal deficit by $3 trillion over ten years, largely through tax hikes on corporations and wealthy individuals. However, these plans face strong opposition from powerful business interests.
The National Deficit and the Candidates’ Proposals
Without corresponding tax increases, the University of Pennsylvania’s Penn Wharton Budget Model estimates that Harris’ tax cuts could raise the deficit by as much as $2 trillion over the next decade.
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Both Trump’s and Harris’ plans depend heavily on congressional dynamics, as Wendy Edelberg of the Brookings Institution emphasizes. The success of their proposals will hinge on the balance of power in Congress following the elections.
Congressional Tax Agenda for 2025
Regardless of who wins the presidency, tax reform will be a key issue in Congress next year. Many provisions of Trump’s 2017 tax cuts, including lower individual rates and small business deductions, are set to expire at the end of 2025, forcing lawmakers to revisit the tax code.
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Trump has made extending these tax cuts a central goal of his campaign, a move that the Congressional Budget Office estimates would cost $4.6 trillion over the next decade.
Funding Shortfalls and Economic Risks
Trump has proposed additional tax cuts, including reducing the corporate tax rate from 21% to 15%, which would add $874 billion to the overall cost. Other ideas, such as excluding Social Security payments from taxes and exempting tipped wages, bring the total cost of his proposals to $10.5 trillion.
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Although Trump has suggested universal tariffs to raise revenue, experts warn that this approach could stifle economic growth and hurt industries affected by retaliatory trade measures. Concerns over rising national debt are growing, with agencies like Moody’s signaling possible downgrades of the U.S. credit rating due to unsustainable budget deficits.