Trump's Tax and Trade Policies: Potential Boon or Burden for Middle-Class Americans?

The election of Donald Trump suggests tax policy changes that may influence middle-class Americans’ financial prospects. President-elect Trump will not know the wider effects of his tax ideas until he officially assumes office next year. Despite his pledge to reduce taxes for the majority of Americans by delaying or making permanent the 2017 Tax Cuts and Jobs Act (TCJA).

Will Trump’s trade policies and other issues ignore the advantages, or will middle-class households experience long-term benefits? His tax plan impacts the middle class in this way.

Keep the tax rate at its current level

President-elect Trump pledged during this year’s campaign to either extend or permanently alter the TCJA. Next year, the bill that altered the federal tax code in many ways and impacted the middle class is scheduled to expire.

Andrew Loposser, owner of APL Consulting, a Republican consulting firm based in Virginia. He stated that owner-elect Trump intends to offer much-needed relief by tackling the skyrocketing expenses of inflation with his tax plan. The plan will not increase taxes for families whose budgets have already been stretched for years. It will encourage businesses to hire more workers.

Increased Tax Obligations

While keeping or permanentizing the 2017 tax cuts will benefit middle-class families with daily expenses, President-elect Trump’s tax policies also have drawbacks, according to Paul Carlson, a CPA and managing partner of Law Firm Velocity.

Carlson stated that the drawback is that permanent cuts could result in budget deficits in social programs like healthcare and education, which are essential to many middle-class families. He added that families, particularly those with several children, will suffer if Trump reduces the Child Tax Credit from its present amount of $2,000 in the future. Carlson told that you really want to increase your emergency savings right now. If taxes increase or credits are reduced, you will need that buffer.

Quicken the Growth of Your Income

Another significant element of the 2017 tax law amendments implemented during Trump’s first term aligned the corporate income tax rates in the United States with those in Europe and Asia. According to Wayne Winegarden, an economist at the Pacific Research Institute. This tax cut increased U.S. economic competitiveness and accelerated income growth for middle-class families. Middle class families nationwide will experience slower income growth and fewer job opportunities if the tax reductions expire.

Raise the Cost of Commonplace Items

During this year’s presidential campaign, one of Trump’s controversial ideas was to impose a uniform baseline tariff on imports of 10%–20%. A 10% uniform tariff, according to the impartial Tax Foundation. It would raise household taxes in the United States by an average of $1,253. According to Winegarden, Trump’s tax proposal includes tariffs since they are a form of consumption tax.

Winegarden stated that tariffs are a particularly destructive form of taxation. They increase expenses, just like all taxes do. Families with lower purchasing power will be directly responsible for some of these expenses.

Social Security income and tips are exempt from taxes.

Trump suggested removing Social Security, overtime compensation, and tips from the income tax. These changes may impact 56% of beneficiary households. The estimated 6 million Americans who depend on tips for a portion of their income.