A new analysis projects that former President Trump’s spending and tax proposals could add north of $4 trillion to the nation’s deficits over a decade.
The Penn Wharton Budget Model (PWBM) analysis, released Monday, estimates the effects of an array of the Trump campaign’s economic proposals, ranging from extending key provisions in the former president’s signature 2017 tax law, doing away with taxes on Social Security benefits, as well as reducing the corporate income tax rate.
In all, analysts estimate the proposals would add a net $5.8 trillion to primary deficits “on a conventional basis” from 2025 to 2034, compared to $4.1 trillion on a dynamic basis, when accounting for “economic feedback effects.”
Extending expiring individual income tax provisions from Trump’s Tax Cuts and Jobs Act of 2017 (TCJA) had the largest price tag in a cost breakdown of the proposals, with the analysis estimating the effort could “add $3.4 trillion to deficits (before interest costs) over the next ten years.”
“Restoring the original TCJA regime for taxing business investment adds another $623 billion to increase the total cost of TCJA extension to more than $4 trillion,” the analysis stated.
The analysis also projects the cost of doing away with taxes on Social Security benefits could amount to as high as $1.2 trillion over a 10-year period, while reducing the corporate tax rate to 15 percent could cost $595 billion over the same time frame.
“Low, middle, and high-income households in 2026 and 2034 all fare better under the campaign proposals on a conventional basis,” the analysis stated, though it added that “these conventional gains and losses do not include the additional debt burden on future generations who must finance almost the entirety of the tax decreases.”
The same group also estimated the budgetary impact of some economic proposals put forward by Vice President Harris in another analysis on Monday, including pitches to beef up the Child Tax Credit and the Earned Income Tax Credit, extend enhanced premium tax credits, provide support to first-time homebuyers, and raise the corporate tax income rate to 28 percent.
“We project that spending increases by $2.3 trillion over 10 years while conventional tax revenue increases by $1.1 trillion, for a difference in primary deficits of $1.2 trillion. Accounting for negative economic feedback effects, primary deficits increase to $2 trillion,” the analysis said.
However, analysts noted in their report at the time that Harris’s campaign had not indicated whether they supported the tax provisions included in President Biden’s fiscal year 2025 budget request, or “whether they support the spending provisions in the FY 2025 budget which were not included in their official announcement.”
Harris’s campaign did, however, confirm to NBC News in a report published on Monday that she backs the revenue proposals in Biden’s budget, which calls for trimming the nation’s deficits by $3 trillion in the next 10 years, with a focus on tax increases on the wealthy.
Analysts also noted that they did not include estimates on proposals by both campaigns aimed at ending taxes on tips for service workers.
“Like our analysis of the 2024 Harris campaign, we do not include the non-taxation of ‘tips’ earned by service workers as originally recommended in public comments by Trump. The 10-year budget cost could vary significantly depending on the ability to reclassify current sources of income as ‘tips’ to the mutual benefit of employers and employees,” they wrote.
“The ability to reclassify income is often a major source of revenue response in conventional tax scoring. As such, a considerable number of additional details would be needed to score this provision.”
