Regardless of who wins in November, the next president and Congress will have to rewrite our nation’s tax code. At the end of 2025, the individual tax provisions in the Tax Cuts and Jobs Act (TCJA) enacted by Republicans in the first year of Donald Trump’s first term will expire. Simply extending all the expiring provisions would saddle future generations with at least $4.6 trillion in debt over the next ten years, with nearly half of the benefit going to the top 5% of households. Working Americans will pay the price for any unfunded extension of these tax cuts, whether it is through higher inflation today or higher taxes needed to fund larger interest payments on the ballooning national debt down the road.
Donald Trump seems to be hoping that working Americans will give him a second term and overlook the costs of extending his 2017 tax cuts by sweetening the pot with additional tax cuts that sound better targeted toward their interests, such as by exempting tips and overtime pay from taxation. But while working-class Americans disproportionately work jobs with hourly wages that are supplemented by tips and overtime pay, many have income tax liabilities that are too low to significantly benefit from such a tax cut. Meanwhile, many working Americans who don’t earn tip income or overtime pay would end up facing higher tax burdens than higher-earning workers who do, such as service workers at high-end establishments.
Trump has also proposed income tax cuts for high-income Social Security beneficiaries that would do nothing for working families other than hasten the insolvency of the program and put their benefits in greater jeopardy. The hole will be even deeper because Trump has also called for repealing one of the few TCJA provisions that actually raised revenue — a $10,000 limit on the amount of state and local taxes that itemizers can deduct from their federal taxes, which would effectively result in a $2 trillion transfer from working families and future generations to the highest-income households. Altogether, the pandering grab bag of Trump Tax Cuts 2.0 would more than double the cost of extending the original.
But Trump’s “plan” to pay for all this by imposing staggeringly high tariffs of 10% to 20% on all imports and up to 60% on goods from China is potentially his worst idea so far. Tariffs are largely passed through to consumers, so Trump’s tariff plan would raise the prices of everyday goods bought disproportionately by working families. It would also cause far greater economic harm by raising input prices for domestic industries, weakening the market for American exports, inviting retaliatory tariffs from other countries, and redirecting investment away from heavily impacted industries such that it would destroy far more jobs than it creates. Plus, the declines in both trade and household incomes that Trump’s tariff would cause mean that his idea would come nowhere close to paying for all of his other tax cuts, leaving current and future generations of working families to foot the bill.
Instead of expanding TCJA’s regressive and costly tax provisions, PPI proposes what would actually be the biggest tax cut on working Americans’ wages in history: repealing the regressive payroll tax. Unlike Donald Trump, who would add the cost of his unaffordable and inflationary tax cuts to the national debt, PPI proposes to more than make up for the lost revenue by adopting a progressive consumption tax. This transformational shift in the tax code would slash taxes for the vast majority of American workers, particularly the 123 million lower- and middle-income households who pay more in payroll taxes than in income taxes, while also reducing the deficit. Our approach would put working families first with a tax code that is both more progressive and more pro-growth.
