Trump’s Economic Plans Could Exceed $4 Trillion Cost Over a Decade: Analysis

An analysis from the Penn Wharton Budget Model reveals that former President Donald Trump’s proposed spending and tax policies could substantially increase the national deficit, potentially exceeding $4 trillion over the next decade.

The analysis, published Monday, scrutinizes a variety of economic proposals from Trump’s campaign. These proposals include extending provisions from his 2017 tax overhaul, eliminating taxes on Social Security benefits, and lowering the corporate income tax rate.

Analysts predict that in total, these measures could lead to a net increase of approximately $5.8 trillion in primary deficits from 2025 to 2034. This figure represents a “conventional basis” estimate, while a more dynamic approach, which takes into account economic feedback effects, suggests a slightly lower deficit addition of about $4.1 trillion.

Among the proposed policies, extending the expiring individual income tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA) stands out as the most financially burdensome. The analysis estimates that this alone could contribute roughly $3.4 trillion to deficits within the upcoming decade.

Furthermore, the report explains that reverting to the original TCJA framework for taxing business investments could increase the overall deficit impact of extending the TCJA by an additional $623 billion. Together, these changes push the total cost of maintaining TCJA provisions beyond the $4 trillion mark.

Additionally, the elimination of taxes on Social Security benefits could impose a fiscal burden up to $1.2 trillion over ten years, while a proposal to lower the corporate tax rate to 15% might carry a cost of around $595 billion in the same time span.

The analysis notes that households across varying income levels in 2026 and 2034 could experience financial improvements under the proposed campaign policies on a conventional basis. However, it warns that these gains may not reflect the added debt that future generations will have to bear, as they’ll be responsible for financing almost all of the proposed tax reductions.

In contrast, the report also evaluates some economic plans presented by Vice President Kamala Harris. These initiatives include enhancing the Child Tax Credit, extending premium tax credits, supporting first-time homebuyers, and increasing the corporate income tax rate to 28%.

According to this analysis, the projected spending could rise by $2.3 trillion over the next decade, while conventional tax revenue boosts are expected to reach $1.1 trillion. This creates a discrepancy in primary deficits amounting to $1.2 trillion. Once accounting for negative economic feedback effects, this deficit rises to $2 trillion.

However, analysts pointed out that Harris’s campaign had yet to clarify its stance on certain tax measures stated in President Biden’s fiscal 2025 budget proposal, as well as whether it supports spending initiatives that were not outlined in their official announcements.

Nonetheless, Harris’s campaign did confirm its endorsement of the revenue proposals within Biden’s budget. This budget aims to reduce the national deficit by $3 trillion over the next ten years, predominantly targeting tax increases on wealthier individuals.

The analysis also emphasizes its omission of estimates related to both campaigns’ proposals to abolish taxes on gratuities for service workers.

In mentioning Trump’s proposals, the analysis states, “Like our analysis of the 2024 Harris campaign, we do not include the non-taxation of ‘tips’ earned by service workers.” This decision stems from the complexities surrounding the potential economic impact based on how income might be reclassified. The financial implications of such a provision could differ widely, influencing the overall budget depending on new classifications and income assessments.

The researchers concluded that comprehensive details would be essential to accurately evaluate this provision’s budgetary implications.

Source: Penn Wharton Budget Model