President Trump on Saturday promised to cut taxes if Republicans win the White House and retake the House of Representatives next year, saying he would pass a “major” middle-class tax cut, the latest in a string of varying tax pledges that he has made in the past week.
Trump has offered few details about the new tax cut or explained how or if it would be paid for. The 2017 tax legislation he signed into law increased the federal deficit by more than $1.5 trillion, according to nonpartisan estimates.
In the run-up to the 2018 midterm elections, Trump similarly promised an unspecified middle-class tax cut if Republicans retained control of the House. But Republicans lost and talk of the tax cuts evaporated.
Trump’s comments, made in a Twitter post while he was in France for the Group of Seven summit, marked one of multiple tax ideas that he has floated in the past week. On Tuesday, Trump said he was considering whether to pursue a payroll tax cut and also reducing capital gains taxes.
On Wednesday, he said both of those ideas were off the table, but later in the week a top adviser said the White House would propose new tax cuts ahead of the election.
Trump’s latest comments seemed to suggest the tax-cut idea would come together after the election, and only if he were reelected and Republicans won back the House. A number of Democrats have proposed rolling back the 2017 GOP tax overhaul and focusing tax cuts more narrowly on middle-class families or repealing the tax cuts to fund improvements in health care, education or infrastructure.
On Thursday, White House economic adviser Larry Kudlow told the Fox Business Network the administration is working on a second round of proposed tax cuts — “tax cuts 2.0” — ahead of the 2020 presidential election that would lower rates for individuals and businesses. Kudlow suggested the personal tax rates could be lowered and the number of tax brackets reduced but offered few additional details.
Sen. Rick Scott (R-Fla.) said on Twitter earlier this week that he held discussions with Kudlow and called on Congress to immediately work on a plan to cut taxes for middle-class families “by the amount the Treasury is collecting in tariffs.” Scott earlier this month proposed giving Americans tax cuts to compensate for the tariffs, a recognition that the import duties are often passed onto the consumer in the form of higher prices.
It is unclear what form the tariff rebate would take, said Nicole Kaeding, vice president of policy promotion at National Taxpayers Union Foundation, or how much it would cost.
“Anything we raise in tariffs, we should give back to the rank and public in tax reductions,” Scott said on CNBC last week.
Trump’s vow to reduce taxes came less than 24 hours after he raised taxes on thousands of U.S. companies that import products from China. Trump late Friday said he was increasing the tariff rate that those companies pay to bring goods in from China, and the hike will affect more than $500 billion in trade.
China responded quickly, saying it would retaliate. Trump’s announcement of the new tariffs was notable because he referred to the import penalties as a form of taxation, a phrase he usually shies away from.
Some budget experts argued Trump’s vow to cut taxes appeared at odds with his push to ramp up tariffs. “A middle-class tax cut would be: Don’t impose the tariffs on China,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, which advocates lower deficits. “That’d be an easy middle-class tax cut Trump doesn’t even need Congress for.”
It was unclear how calculated Trump’s Twitter post on Saturday about the tax cuts might have been. It came during a string of tweets while Trump was waiting for a dinner in France with other world leaders. Other tweets weighed in on the New York subway system, North Carolina’s governor and defending his decision to call himself “the chosen one” earlier in the week.
On Twitter, Trump touted his promise for a new tax cut by pointing to a New York Times headline that read, “Face It, You (Probably) Got a Tax Cut,” and has previously joked that the writers of the story would be fired by the Times for writing positively about the legislation.
Most Americans did see a tax cut under the 2017 Republican tax law, with about 65 percent of households paying less in individual taxes the year after the law was signed, according to the Tax Policy Center.
But the centerpiece of the law was a giant corporate tax cut, which lowered the business tax rate from 35 percent to 21 percent, and polling suggests most Americans do not believe they received a tax cut under the legislation.
Even if middle-class Americans did receive a tax cut from the 2017 law, it may have been too small to notice. Families earning under $25,000 received an average cut of $40 from the law, according to the Tax Policy Center, while middle-income families saw a cut of about $800. The richest 1 percent of Americans, by contrast, saw an average cut of about $33,000.
The tax cuts also helped balloon America’s federal deficit, which is expected to rise above $1 trillion annually next year, and push the United States into the ranks of the countries with the highest levels of debt. The United States is also already near the bottom of the list among developed nations in how much tax revenue it collects as a share of its overall economy.
Further tax cuts before the next recession could also leave the United States with less room to respond by stimulating the economy, some economists said.
“Econ 101 says that if we are at the peak of the business cycle, then that is not the time to put in a tax cut,” said Steve Kyle, an economics professor at Cornell University. “If the downswing does materialize — which it hasn’t yet — then there might be a time to look at it.”