All the ways Donald Trump is promising to cut taxes if he wins
Former President Donald Trump is known for making a lot of promises on the campaign trail, only some of which he’ll likely be able to keep. In 2024, that means a lot of pledges to cut taxes for everyone from police officers and servers to Americans living abroad in Scotland.
If elected to the White House in November, Trump is set to push Congress to enact at least some of the proposals he’s touted over the past several months, which he argues would help boost the U.S. economy and people’s personal finances.
“My plan will rapidly defeat inflation, quickly bring down prices, and reignite explosive economic growth,” Trump said last month at an event in New York after touting plans to slash government regulations.
Some of his pledges are less detailed than others, which has left economists torn over how to properly estimate what effect they could have on the economy and ordinary Americans. Some of the most recent estimates have come from the nonpartisan Committee for a Responsible Federal Budget, which expects a Trump presidency to add around $7.5 trillion to the federal debt, while others can go to as high as $10 trillion over 10 years.
The non-profit Institute on Taxation and Economic Policy found that Trump’s policies would give the richest 5% of Americans a tax cut of between $7,200 and $36,300, while the rest of the country would see their taxes increase by between $790 and $1,790 per year. However, the think tank’s estimates did not account for Trump’s recent flip-flop on the state and local tax (SALT) deduction.
Here’s what the former president is promising voters.
Wear a uniform? Get a tax cut
The former president has long been a fan of uniformed workers, from police officers and firefighters to military personnel. Now, he’s considering a tax cut for each of those groups.
“It’s something I would think about,” Trump said in an interview earlier this month when asked about eliminating federal income taxes for first responders, police officers, active members of the military, and veterans.
According to the Yale Budget Lab, those groups encompass about 6% of Americans, or about 19 million people. That includes 16 million veterans, 1.3 million police officers, 1.2 million veterans, and 360,427 firefighters. A federal income tax exemption for all veterans and uniformed & protective services, or VUPS, would cost $2 trillion over the next decade.
No tax on tips or overtime
One of Trump’s first tax-related proposals was to eliminate the federal tax on tipped wages, although such an act’s effects would likely be scattered.
For starters, many workers receive tips in cash, much of which is never reported to the Internal Revenue Service. And, many of the roughly 4 million workers in tipped occupations already pay zero federal income tax. Thirty-seven percent of tipped workers paid no federal income tax in 2022 — before accounting for tax credits — compared to 16% of workers in non-tipping jobs.
That’s because their pay is already lower than average; The median weekly wage for tipped workers was $538 in 2023, almost half the $1,000 median weekly wage for people who worked jobs without tips. The workers more likely to benefit would be those few working at high-end restaurants or other establishments who interact with wealthier clients more likely to spend more and — sometimes — tip more.
Trump has also promised to end taxes on overtime pay, announcing the plan at an Arizona rally last month as a bid to give “people more of an incentive to work.”
In 2019, his administration raised the salary level for exemption from overtime pay to $35,568 annually from the $23,660 threshold. That move was criticized by labor groups who argued that it covers far fewer workers than a proposal made by Former President Barack Obama in 2015, which would have made almost 5 million more people eligible for overtime; Trump’s made just 1.3 million workers eligible.
Rival presidential candidate Vice President Kamala Harris has announced her own plans to eliminate the tax. However, her plan would also see the federal government eliminating subminimum wages.
A bid to overseas voters
Trump’s latest tax promise is an end to the “double taxation” of Americans living overseas, referring to the U.S. citizens who have to file their taxes both with the Internal Revenue Service and foreign governments.
That can result in them paying taxes both in the U.S. and in their country of residence unless there’s a double tax agreement between that nation and the U.S. Dozens of countries ranging from Canada and Egypt to Luxembourg and Venezuela have such tax treaties with the U.S., which can provide reduced rates and exemptions, according to the IRS.
Citizens living abroad also don’t owe taxes on the first $126,500 they earn while living out of the U.S. and can receive some tax credits. Most tax treaties have a “saving clause,” which prevents U.S. citizens or residents from avoiding paying taxes on income sourced from the U.S.
According to the Federal Voting Assistance Program, 4.4 million U.S. citizens live overseas and 2.8 million can vote, although just 3.4% voted in the 2022 midterm election and 7.8% voted in the 2020 presidential election. Roughly 1.6 million overseas voters are from crucial swing states such as Arizona and Pennsylvania, CBS News reported in August, citing a Democratic National Committee voter outreach campaign.
Trump’s 2017 Tax Cuts and Jobs Act
The Republican presidential candidate has said he will extend the tax cuts included in his 2017 Tax Cuts and Jobs Act (TCJA), including SALT, which he recently vowed to restore in a bid to win over voters in competitive congressional districts.
Trump’s running mate, Ohio Senator J.D. Vance, has floated expanding the Child Tax Credit to $5,000; it was doubled to $2,000 per child by the TCJA. During the pandemic, Congress expanded that allowance to between $3,000 and $3,600, but it lapsed in 2021.
Senate Republicans in August blocked a $78 billion tax-cut package that would have expanded eligibility for the tax credit and adjusted payments for inflation for the 2024 and 2025 filing years; Vance missed that Aug. 1 vote where his colleagues voted against expanding the credit by a 48-44 vote.
Along with expanding the CTC to $5,000, Vance has hinted that he would like to see an expanded CTC without income thresholds. Currently, single filers who make more than $200,000 or married couples with a combined income of more than $400,000 are not eligible.
The Harris campaign has announced its own plan to restore the expanded CTC and make its benefits permanent, alongside a $6,000 tax credit for low-income or middle-income families within a newborn child’s first year.
Without intervention by Congress, the CTC will regress to $1,000 per child by 2026 after Trump’s Tax Cuts & Jobs Act expires next year. Expanding the CTC could “easily” add between $2 trillion and $3 trillion in federal borrowing over the next decade, a senior policy director for the Committee for a Responsible Federal Budget told CBS.
No taxes on Social Security
“SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” Trump wrote in July on his social media platform, Truth Social, referring to the partial income taxation of Social Security benefits.
Recipients of Social Security benefits must pay federal income taxes if their combined income is higher than $25,000 each year if they file individually, or $32,000 for joint filers, according to the Social Security Administration.
The former president has not offered up a way to replace that revenue, which helps fund the Social Security and Medicare Hospital Insurance trust funds. According to the Committee for a Responsible Federal Budget, ending taxation of Social Security benefits alone could cut between $850 billion and $950 billion from its cash reserves.
When combined with several of his other proposed tax cuts, Social Security could be rendered insolvent three years ahead of schedule, the CRFB said. Benefits would have to be cut by 23% by 2035, according to the Congressional Budget Office. Trump’s plans would raise that benefit cut to 33% by 2035, according to the CRFB.
Trump has also recently pitched a tax credit for “family caregivers who take care of a parent or a loved one,” but provided no further details as to how much would be doled out.
Even lower corporate taxes
Trump recently proposed slashing the corporate tax rate to 15% for companies that make products with American workers. He had previously advocated for lowering corporate taxes to 20%, building on his 2017 tax cuts that slashed the rate from 35% to 21%.
At a meeting in June attended by top U.S. CEOs, including JPMorgan Chase (JPM) CEO Jamie Dimon, Apple (AAPL) CEO Tim Cook, and Citigroup’s (C) Jane Fraser, Trump vowed to make the cuts permanent and to renew tax breaks for individuals and small businesses. Trump, in a further appeal to Wall Street, has also promised to reduce business regulations if he is elected.
Harris has promised to raise the corporate tax rate to 28% from its current 21%, keeping in line with the budget the Biden administration proposed in March.
The ultimate tax cut
With all that said, Trump isn’t just looking at targeted reductions. He’s also looking at the Holy Grail of all tax cuts — eliminating income taxes altogether.
During an interview earlier this month with Fox News, Trump said the U.S. should return to the economic policies it had employed in the late 1800s, when there was no federal income tax. The first, short-lived, income tax came after the Civil War, before it was brought back in 1913 with the 16th Amendment to the Constitition.
“It had all tariffs — it didn’t have an income tax,” Trump said. “Now we have income taxes, and we have people that are dying. They’re paying tax, and they don’t have the money to pay the tax.”
Trump has floated replacing the income tax with tariffs, a change that would turn the U.S. tax system from progressive — meaning that people with more income pay a higher tax rate — to regressive. Tariffs would raise the prices on imported goods, such as food and clothing, which would have a disproportionate effect on poorer Americans.
Read More: Donald Trump and the trouble with tariffs
According to the non-partisan Tax Foundation, the individual income tax raises about 27 times as much revenue as the U.S.’s current tariffs. Replacing the $2 trillion in revenue generated by the income tax would require tariffs of almost 70% on all imports. However, that analysis doesn’t account for several factors, such as noncompliance.
Tariffs, tariffs — and more tariffs
“The most beautiful word in the dictionary is tariff,” Trump said on Oct. 16 at an on-stage interview at The Economic Club of Chicago. “It’s my favorite word.”
Between 2018 and 2020, the Trump administration raised taxes on U.S. imports from China by more than 500%. Those goods represented more than a fifth of everything that Americans purchased abroad, Quartz reported in 2020. Prior to Trump’s trade war, the U.S.’s tariffs were among the lowest in the world, averaging at around 1.6%.
On the 2024 campaign trail, Trump has proposed raising duties on imports from China by as much as 50%, to 60% in total, while adding duties of 10% to 20% against products from the rest of the world. He’s also talked about a “100% tariff” on countries that “leave” the U.S. dollar and tariffs of as much as 2,000% on foreign-made vehicles.
While speaking at a rally in New York’s Madison Square Garden on Sunday, he brought up the “Trump Reciprocal Trade Act,” which he pitched as an “eye for an eye” proposal. Essentially, if the U.S. is hit with tariffs, the country would slap the same duties on that nation.
Trump’s tariffs could, by some estimates, add between $1,700 to $7,600 in annual costs to American households. According to the Institute on Taxation and Economic Policy (ITEP), his potential tariffs hikes would outweigh the effects of any tax cuts he’d institute for 95% of American households.
Trump has denied that Americans would bear the weight of tariffs, arguing instead that it hits foreign companies who ship products to the U.S. However, companies generally pass those higher costs on to consumers by raising prices.