One of the defining features of Donald Trump’s presidential campaign was the promise of massive tax cuts for the wealthy, the working class, and businesses alike.
Now it is up to congressional Republicans to decide which of those cuts to propose as legislation. To pay for the cuts, they have begun to set fundraising goals. Among them are cuts to benefits for single mothers and low-income people who rely on government healthcare.
The proposals are part of a menu of tax and spending cuts released by House Republicans this month. It remains to be seen whether Republicans will put any of these ideas into action. Some potential targets include popular tax breaks, and cuts could be politically risky. Furthermore, lowering taxes on the wealthy could harm Trump’s populist image.
For the ultrawealthy, the document proposes eliminating the federal estate tax, which is expected to cost the government $370 billion in revenue over the next decade. The tax, which charges a percentage of a person’s fortune after death, applies only to estates worth more than $14 million.
According to estimates from the Tax Policy Center think tank, nearly 30% of the tax is paid by the top 0.1% of income earners. (Many ultra-wealthy individuals already avoid the tax.
As ProPublica previously reported, lawyers and accountants have devised ways to pass fortunes to heirs tax-free over the years, often through the use of complex trust structures.
Another proposal aims to reduce the top corporate tax rate by nearly a third.
Trump promised such a cut during his campaign. But Vice President JD Vance spoke out against it before Trump chose him as his running mate.
“We are sort of in line with the OECD right now,” he said in an interview last year, referring to the Organization for Economic Cooperation and Development, which is made up of 38 wealthy developed countries. “I do not think we need to be cutting the corporate tax rate further.”
During Trump’s first term, he reduced the top corporate rate from 35% to 21%, where it is now, moving the United States from a high rate compared to other OECD countries to about average. The proposed 15% cut would put the United States among the countries with the lowest rates.
To pay for new tax cuts, the House Republicans’ proposal includes a number of potential government program overhauls. One major focus is on possible cuts to Medicaid, the state-run health-care program for low-income people.
The Affordable Care Act, signed into law by President Barack Obama, included Medicaid expansion as a key provision. Many Republican governors initially declined to take advantage of the new federal subsidies to expand the program.
In the intervening years, several states reversed course, and the program has increased the number of Medicaid enrollees by more than 20 million as of last year.
The document proposes deep cuts to the program, including slashing state reimbursements. According to a health policy organization, states would need to “raise new revenues or reduce Medicaid spending by eliminating coverage for some people, covering fewer services, and (or) cutting rates paid to physicians, hospitals, and nursing homes,” according to an analysis.
Trump’s position on Medicaid has been inconsistent over time. During his first term, he sought to reduce the program. However, he has also made statements about protecting it over the years.
Trump promised at a 2023 campaign event that “we are not going to play around with Medicare, Medicaid.” However, it is unclear whether the comment was a throwaway: While Trump has focused on preserving Medicare, the program that covers health care for the elderly, he has not prioritized Medicaid.
The official GOP platform unveiled by Trump last year, for example, promised not to cut “one penny” from Medicare while remaining silent on Medicaid. During the campaign last year, Trump appeared to support cuts to “entitlements” when asked about Medicare, Medicaid, and Social Security.
Other proposals would end tax breaks for families with children.
Parents can currently claim a $2,100 tax credit for child care expenses. The House Republican plan calls for the elimination of that break. The cut is expected to save $55 billion over a decade.
Vance, in particular, promised economic policies that would reduce the burden on parents. “It is the task of our government to make it easier for young moms and dads to afford to have kids,” as he stated last week. (He ran on a platform to more than double the child tax credit.)
Another proposal on the list of options is aimed directly at single-parent families. The provision would eliminate the “head of household” filing status in order to collect nearly $200 billion in additional taxes from single parents and other adults who care for dependents on their own over the next decade.
The “head of household” status was created in the 1950s with the idea that single parents should face a lower tax burden. Eliminating it would affect millions of Americans, primarily women. (According to a Tax Foundation analysis, people with incomes between the 20th and 80th percentiles, or those earning between $14,000 and $100,000, would see the greatest drop in after-tax earnings.)
Democrats have criticized the proposals as a favor for the wealthy at the expense of the working class. “Republicans are gearing up for a class war against everyday families in America,” said Sen. Ron Wyden, D-Ore.
A White House spokesperson did not respond to questions about the specifics of the House GOP document, but did state in an email that “This is an active negotiation and process in which the President and his team are working productively with Congress.”
His visit to the House Retreat [Monday] demonstrated that he wants to prioritize unity and a good deal for Americans that fulfills his campaign promises.”
A spokesperson for the House Budget Committee declined to answer specific questions, saying only that “this is a menu of policy options for authorizing committees to consider as members navigate the reconciliation process.”
Some of the proposals would fulfill Trump’s campaign promises aimed at the working class.
The document includes a plan to eliminate income taxes (but keep payroll taxes) on tips, at a cost of $106 billion over ten years. Trump touted the proposal while campaigning in Las Vegas, hoping to gain support from the city’s large contingent of service workers.
Trump’s Democratic opponent, former Vice President Kamala Harris, later promised to do the same. Economists have criticized the idea as unfairly favoring one group of working-class employees over others who are paid the same but work in industries that do not accept tips.
Another Trump campaign promise included in the document is to eliminate overtime pay taxes, which would cost $750 billion over ten years. Tax experts have also criticized the proposal as an inefficient way to provide relief for lower-wage workers who qualify for overtime because they are paid hourly and perform repetitive tasks.
Critics argue that the provision encourages gaming and complicates tax reporting by imposing new reporting requirements on taxpayers’ hours worked.
One of the most significant proposals to generate new revenue in the House Republicans’ document would eliminate a tax break popular among upper-income Americans: the mortgage interest deduction.
The document estimates that eliminating the break would save $1 trillion over ten years. According to the Tax Foundation, Americans earning more than $200,000 per year receive an estimated 60% of the value of this deduction due to a complex interplay of various tax code provisions.
Eliminating the mortgage interest deduction would have an uneven geographic impact: analyses show that the tax break is more valuable to Americans in Democratic-dominated states like California, Massachusetts, and New Jersey.
