As the Trump administration continues to make headlines with its approach to governance, one of the most contentious issues has been the Department of Government Efficiency (DOGE), led by tech billionaire Elon Musk. At the Tax Project Institute, we remain committed to our core mission of promoting government spending transparency, ensuring that American citizens have access to the data they need to make informed decisions about how their tax dollars are spent.
The recent flurry of developments surrounding DOGE has raised questions about its scope and transparency. While government watchdog groups have expressed concerns about the agency’s operations and potential conflicts of interest, we at the Tax Project Institute do not condone any actions that may violate laws or harm individuals and organizations. However, we are interested in seeing more data become available to the public.
DOGE Mission
DOGE was established by President Trump through an executive order, with the stated goal of modernizing federal technology and software to maximize governmental efficiency and productivity. Despite this narrow focus, critics argue that the agency’s broader mission to cut government waste and slash federal regulations could have far-reaching implications. While we may not agree with DOGE’s approach, we welcome the potential for increased transparency and data availability that could arise from its activities.
At the Tax Project Institute, we believe that transparency is essential for a functioning democracy. It allows citizens to hold their government accountable and make informed decisions about public policies. Unfortunately, instead of receiving comprehensive and systematic information about government expenditures, we often rely on sensational news stories to glean insights into how American tax dollars are being spent. The lack of transparency forces us to piece together fragments of information from various sources, including the pieces emerging from DOGE.
Transparency for All
We hope that as DOGE continues its work, more data will be made officially available to the public. This would align with our mission to empower American citizens by providing them with the information they need to make informed choices. Whether one supports or opposes specific government spending initiatives, it is their right to know how their tax dollars are being used. This principle is fundamental to democratic governance and ensures that citizens can hold their elected officials accountable for fiscal stewardship.
The creation of DOGE, with its stated goal of making cuts to the federal budget and workforce, has sparked intense debate. While some may view this initiative as a necessary step towards fiscal responsibility, others see it as a threat to essential public services and jobs. Regardless of one’s stance on these policies, it is crucial that citizens have access to accurate and detailed information about government spending.
Transparency in government spending is not merely a matter of principle; it has tangible benefits for democracy. When citizens are well-informed about how their tax dollars are allocated, they can engage more effectively in public discourse and participate in decision-making processes. This engagement fosters a more accountable government, as policymakers are more likely to align their actions with public priorities when citizens are actively monitoring their activities.
Moreover, transparency can help reduce corruption and mismanagement of funds. By making budget information easily accessible, governments can deter corrupt practices and ensure that resources are allocated efficiently. This is particularly important in the context of tax expenditures, where a lack of transparency can obscure the impact of tax policies on economic outcomes.
Tools like USAspending.gov and other fiscal data platforms have made significant strides in providing insights into federal spending. However, there is still room for improvement. At the Tax Project Institute, we advocate for policies that ensure American citizens have access to comprehensive and reliable data on government expenditures. By promoting transparency, we can build a more accountable and responsive government that truly serves the interests of all Americans.
Summary
In conclusion, while the Trump administration’s approach to reform may be contentious, our focus at the Tax Project Institute remains on the core principle that citizens have a right to know how their government operates and allocates resources. We hope that initiatives like DOGE will lead to more official data releases, reducing reliance on sensational news leaks and fostering a more informed and participatory citizenry. By advocating for greater transparency, we aim to empower Americans to engage more actively in their democracy, fostering a more accountable and responsive government.
As we approach the United States’ 250th Semiquincentennial next year, a monumental shift in our nation’s economic strategy is underway. President Trump’s recent executive order to create a U.S. Sovereign Wealth Fund (SWF) marks a pivotal moment in American financial history[2][4]. At the Tax Project Institute, we have long discussed the potential benefits of a national investment account in the form of a SWF, recognizing its transformative potential for our economy (See our Article on Sovereign Wealth Funds here).
A Sovereign Wealth Fund is a state-owned investment fund that manages a country’s excess reserves, typically derived from natural resource revenues, trade surpluses, or other sources of national wealth. These funds are designed to invest in a diverse range of assets, both domestic and international, to generate returns and support long-term economic objectives. Much like a national investment account, it grows and compounds over time, and as it grows it becomes of source of revenue offsetting the need for things like additional taxes.
The creation of a U.S. SWF is a watershed moment that may be viewed by future generations as one of the most impactful acts in American history, comparable to the Louisiana Purchase, the Emancipation Proclamation, or the New Deal. Just like a savings and investment account, it doesn’t sound or look like much now, but in 50 or 100 years it could be game changing, and looked at in the same way as other major acts. While it won’t immediately solve our national debt issues or eliminate budget deficits, it could be the first step towards putting our country on a more substantial economic footing.
What are they for?
Sovereign Wealth Funds serve various purposes across the globe. Some of the key areas where SWFs are utilized include:
Economic Diversification: SWFs help countries reduce their dependence on a single sector or resource by investing in a wide range of industries and assets.
Intergenerational Savings: They can preserve wealth for future generations, especially in countries with finite natural resources.
Stabilization: SWFs can act as fiscal stabilizers during economic downturns or when commodity prices fluctuate.
Strategic Investments: They allow countries to invest in key industries or technologies that align with national interests.
Infrastructure Development: Many SWFs focus on funding critical infrastructure projects both domestically and internationally.
In short, they are investment accounts run by the country, and the hold the potential to fund significant portions of future expenses, and offset revenue short falls.
What it means for the U.S?
The U.S. SWF has the potential to become the largest in the world, given the size and strength of the American economy. As of 2025, the largest SWF is Norway’s Government Pension Fund Global, with assets under management of $1.78 trillion[6]. The U.S. fund could potentially surpass this figure, leveraging the country’s vast economic resources and global influence.
The implications of a U.S. Sovereign Wealth Fund are far-reaching:
Enhanced Global Economic Influence: A large U.S. SWF would significantly increase America’s economic clout on the world stage, potentially rivaling or surpassing the influence of other major SWFs from countries like China, Norway, and the UAE[6].
Domestic Investment: The fund could be used to finance critical infrastructure projects, support emerging industries, and drive innovation within the United States.
Long-term Fiscal Planning: A well-managed SWF could provide a cushion against economic downturns and help address long-term fiscal challenges.
Wealth Distribution: If structured appropriately, the fund could potentially provide direct benefits to American citizens, similar to Alaska’s Permanent Fund[4].
Strategic Acquisitions: The fund could be used to acquire stakes in strategically important companies or technologies, as hinted at by the potential involvement in TikTok[2][4].
Market Impact: The sheer size of a U.S. SWF could have significant effects on global financial markets, potentially influencing asset prices and investment trends
While not a panacea, a SWF offers significant Economic flexibility at scale to offset and provide services in a number of ways to minimize economic shocks, like the 2008 Great Recession or the COVID pandemic, or offset expenses on long term items like infrastructure, or potential pending large scale changes in the market, like AI offsetting white collar jobs.
Global Context
As we consider the potential of a U.S. Sovereign Wealth Fund, it’s important to look at some of the largest existing SWFs for context:
Country
Fund
Value
Norway
Norway Government Pension Fund Global
$1.78 Trillion
China
China Investment Corporation (CIC)
$1.3 Trillion
Abu Dhabi
Abu Dhabi Investment Authority
$1.05 Trillion
Kuwait
Kuwait Investment Authority
$1 Trillion
Saudi Arabia
Public Investment Fund
$925 Billion [6]
These funds have played crucial roles in their respective countries’ economic strategies, from Norway’s focus on preserving oil wealth for future generations to China’s efforts to diversify its foreign exchange reserves. Given that the US GDP is almost 13 times larger than Norway, you can see the potential size of the fund and the proceeds that it maybe able to throw off. Just doing simple math lets say the US SWF reaches $20 trillion, taking 4% annually from the fund to reinvest on Americans (offset taxes, new infrastructure, services, direct payments, etc.) could lead to $800 billion in annual offsets. Given the unending demands on government budget, this won’t solve our problems, but it can certainly help.
Summary
The creation of a U.S. Sovereign Wealth Fund represents a paradigm shift in how America approaches its economic future. As Treasury Secretary Scott Bessent explained, “It will include a mix of liquid assets and resources that we possess domestically as we aim to make them available for the American populace.”[4] This approach could unlock significant value from government assets and activities that have previously been underutilized.
However, the establishment of such a fund is not without challenges. Proper governance structures, transparency measures, and regulatory frameworks will be crucial to ensure the fund operates in the best interests of the American people. As a 2024 study by the Carnegie Endowment for International Peace warned, without appropriate safeguards, sovereign wealth funds could potentially become “vehicles for corruption, money laundering, and other illegal activities.”[4]
The development of the U.S. SWF over the next year will be a process closely watched by economists, policymakers, and global investors alike. Its potential to reshape America’s economic landscape and global financial influence cannot be overstated. As we celebrate our nation’s 250th anniversary, the creation of this fund may well be remembered as a defining moment in our economic history.
In conclusion, the establishment of a U.S. Sovereign Wealth Fund represents a bold step towards securing America’s economic future. By leveraging our nation’s vast resources and economic power, this fund has the potential to drive innovation, support critical investments, and ensure long-term fiscal stability. As we move forward, it will be essential to strike a balance between ambitious growth and responsible management, ensuring that this new economic tool truly serves the interests of all Americans for generations to come.
As the US Federal Fiscal year draws to a close each September, a peculiar phenomenon grips government agencies across the United States. Known colloquially as “The Big Flush,” this annual event sees a dramatic surge in government spending as departments rush to exhaust their remaining budgets. This practice, driven by the “use it or lose it” mentality, raises important questions about fiscal responsibility, government efficiency, and the delicate balance of power between the legislative and executive branches.
The Appropriations Process and Legal Framework
To understand the year-end spending surge, we must first examine the federal budget process. The U.S. Constitution grants Congress the “power of the purse,” giving it ultimate authority over government spending. This power is exercised through the annual appropriations process, where Congress determines funding levels for various federal agencies and programs.
The Congressional Budget and Impoundment Control Act of 1974 (ICA) further refined this process, establishing procedures for congressional budgeting and placing limits on the executive branch’s ability to withhold appropriated funds. This legislation was a direct response to President Nixon’s attempts to impound funds allocated by Congress, a practice the Supreme Court later deemed unconstitutional in Train v. City of New York (1975)[2].
Under the ICA, the President is required to spend all appropriated funds unless specific procedures are followed to request rescissions (i.e Cancel spending) or deferrals (i.e. Delay spending). For rescissions, the President must propose them to Congress, which then has 45 days to pass a rescission bill. If Congress fails to act within this timeframe, the President must release the funds as originally appropriated[5]. Deferrals, which temporarily delay spending, can be overturned by either house of Congress passing a resolution of disapproval[1].
The “Use It or Lose It” Phenomenon
The legal requirement to spend appropriated funds, combined with the annual budget cycle, has given rise to the “use it or lose it” mentality among government agencies. This phenomenon refers to the tendency of departments to rapidly spend their remaining budget allocations in the final weeks of the fiscal year, fearing that unspent funds will be returned to the Treasury and potentially lead to budget cuts in subsequent years[1].
Research has empirically demonstrated the existence of this year-end spending surge. A study by economists Jeffrey Liebman and Neale Mahoney, cited in the National Bureau of Economic Research (NBER) working paper, found that federal agencies spend an average of 4.9 times more in the last week of the fiscal year than in a typical week[1]. This dramatic increase in spending raises concerns about the quality and necessity of last-minute spending.
Implications for Taxpayer Money and Government Efficiency
The year-end spending surge has significant implications for the efficient use of taxpayer money. Critics argue that this practice encourages wasteful spending on low-priority or unnecessary items simply to meet (exhaust) budgets. The rushed nature of these purchases may lead to poor decision-making, inadequate vetting of contracts, and reduced value for money.
Liebman and Mahoney’s research supports these concerns, suggesting that the quality of spending decreases during the year-end surge. They found that many of these last-minute expenditures fall below the social cost of funds, effectively meeting the definition of wasteful spending[1].
The social cost of funds is an important concept in evaluating government spending. It refers to the total cost to society of using public resources for a particular purpose, including both direct costs and indirect costs such as economic distortions caused by taxation[13]. When year-end expenditures fall below this threshold, it means that the societal benefits derived from the spending are less than the overall cost to society of providing those funds[1].
Moreover, this pattern of spending can distort the overall allocation of resources within the government. Agencies may prioritize easily executable, short-term expenditures over more strategic, long-term investments that could yield greater public benefit but require more time to plan and implement.
The Executive Branch Conundrum
While the ICA and subsequent court decisions have reinforced Congress’s power of the purse, this strict approach to budget execution creates a conundrum for the executive branch. On one hand, the President and federal agencies are legally obligated to spend appropriated funds as directed by Congress. On the other hand, this requirement may hamper the executive branch’s ability to respond flexibly to changing circumstances or to implement more efficient spending strategies.
The executive branch, with its day-to-day management of government operations, may be better positioned to identify areas where spending could be reduced or reallocated more effectively. However, the current system provides limited flexibility to do so without going through the cumbersome rescission or deferral processes outlined in the ICA. The bottom line is rarely do planning estimates (Congress Appropriations) match the real world actual expenses.
This tension between compliance and efficiency creates a challenging environment for agency leaders. They must balance their legal obligation to spend appropriated funds with their responsibility to use taxpayer money wisely. The fear of budget cuts in future years if funds are left unspent further complicates this balancing act, potentially incentivizing suboptimal spending decisions in order to protect budget.
Congressional and Judicial Support for the Power of the Purse
Despite these challenges, both Congress and the courts have consistently upheld the legislative branch’s primacy in budgetary matters. The Supreme Court’s decision in Train v. City of New York (1975) effectively removed the presidential power of impoundment, reinforcing Congress’s control over spending[2].
This stance is rooted in the constitutional separation of powers and the principle that the power to appropriate funds is a fundamental check on executive authority. If the executive branch could unilaterally decide not to spend appropriated funds, it would effectively nullify Congress’s constitutional power to levy taxes and borrow money[9].
However, this strict interpretation of the power of the purse creates a paradox. While it aims to prevent executive overreach and ensure that the will of Congress (and by extension, the people) is carried out, it may inadvertently promote inefficiency and waste in government spending.
Mechanism for Improvements
While the Tax Project does not make policy recommendations, it is clear that Process improvements and new mechanisms could improve overall results. Potential improvements could include a more flexible system with ongoing budget feedback loops, allowing for more dynamic allocation of resources throughout the fiscal year. Additionally, a mechanism by which the executive and Congress could work together more closely on budget execution could be beneficial. This could involve tying budget flexibility to legislative outcomesachieved by the executive team, rather than focusing solely on the amount spent[9].
Furthermore, consideration could be given to mechanisms that support longer-term projects. The current annual budget cycle can make it challenging to plan and execute multi-year initiatives effectively. A system that allows for better management of funds across fiscal years for approved long-term projects could lead to more strategic investments and reduce the pressure for year-end spending[9].
Conclusion
The “big flush” of year-end government spending highlights the complex interplay between fiscal responsibility, government efficiency, and constitutional principles in the United States. While the current system, rooted in the Congressional Budget and Impoundment Control Act, aims to uphold Congress’s power of the purse and prevent executive overreach, it also creates incentives for potentially wasteful spending practices.
Addressing this issue requires a delicate balance. Any reforms must respect the constitutional separation of powers and Congress’s fundamental role in determining government spending. At the same time, they should aim to promote more efficient and effective use of taxpayer money throughout the fiscal year.
As the debate continues, it is clear that finding this balance is crucial for ensuring good governance and fiscal responsibility in the modern era. The challenge lies in developing a system that maintains strong legislative control over spending while providing the flexibility needed for efficient and responsive government operations. Only through careful consideration and bipartisan cooperation can meaningful reforms be achieved to address the “big flush” phenomenon and improve the overall management of federal resources.
Trump’s Tax Plan: Proposals and Potential Outcomes
As the United States transitions from the 2024 election to what the expectations of the incoming administration will do, former President Donald Trump’s tax plan proposals, including the Department of Government Efficiency (DoGE), have garnered significant attention. While these may have been statements during the Campaign or since by President Elect Trump, DoGE, Elon Musk, Vivek Ramaswamy, or other members of the incoming administration what is expected to be part of the incoming administration, many of these proposals are speculative and yet to be formalized as the plan of record, and it is likely even if they do make it to plan they will have significant hurdles in execution. However, with both houses of congress favoring the new administration these proposals, if implemented, could have far-reaching effects on the American economy, individual taxpayers, and businesses. While no one has a crystal ball to know what will be enacted this article aims to provide a comprehensive overview of the most up to date information on Trump’s proposed tax changes and there potential impacts on various economic factors.
Key Components of Trump’s Tax Plan
Individual Tax Reforms
1. Extension of the 2017 Tax Cuts and Jobs Act (TCJA)
What is it?
Keeping current tax cuts in place.
One of the central pillars of Trump’s tax plan is the permanent extension of the individual and estate tax provisions from the 2017 TCJA, which are set to expire at the end of 2025. This extension would maintain the current tax brackets and rates, as well as the increased standard deduction and child tax credit.
Key Points:
Permanently extend individual and estate tax provisions
Maintain current tax brackets, rates, deductions
Potential Outcomes:
Maintaining lower tax rates could provide continued tax relief for many Americans.
The extension could contribute to increased consumer spending and economic growth.
Could lead to a reduction in Federal revenue and an increase in budget deficit if not offset by growth.
The TCJA’s extension could provide stability in tax planning for individuals and businesses. However, the long-term fiscal implications of making these cuts permanent are a subject of debate among economists and policymakers.
2. Tax Exemptions for Specific Income Types
What is it?
Making certain types of income tax-free
Trump has proposed exempting overtime pay, tip income, and Social Security benefits from taxation .
Key Points:
Exempt overtime pay, tip income, and Social Security benefits
Potential Outcomes:
These exemptions could provide tax relief for certain workers, particularly in the service industry and for retirees.
These exemptions will reduce Federal revenue that may not be offset by growth and could potentially complicate the tax code.
These exemptions could provide targeted relief to specific groups of workers, in particular low wage earners, and retirees. However, they may also introduce new complexities into the tax system and reduce overall tax revenue.
3. Child Tax Credit Expansion
What is it?
Bigger tax break for parents
There are indications that Trump is considering expanding the child tax credit to $5,000 per child, a significant increase from the current $2,000.
Key Points:
Increase to $5,000 per child from $2,000
Potential Outcomes:
This expansion could provide substantial financial relief for families with children.
It might encourage long term population growth and support working parents.
It would represent a significant cost to the federal budget.
This proposal could significantly benefit families with children, potentially reducing child poverty rates. However, the fiscal impact of such a large increase in the credit would be substantial.
4. Eliminate Overseas Income Taxation
What is it?
No U.S. taxes for Americans living abroad.
Trump has stated that he would eliminate income taxes on Americans living abroad. During his 2024 presidential campaign, he pledged to end double taxation of overseas Americans . America is the only country that taxes foreign income made abroad.
Key Points:
End income taxes on Americans living abroad
Potential Outcomes:
May encourage some migration, especially for U.S. retirees.
Would eliminate additional sources of US Income.
This proposal would align U.S. tax policy more closely with that of other countries, potentially making it more attractive for Americans to work or retire abroad.
5. Tax-Free Universal Savings Accounts (USAs)
What is it?
New savings accounts with tax benefits.
Trump proposes introducing new savings accounts aimed at increasing and simplify saving for individuals.
Key Points:
Tax-Free Growth: Contributions would grow without being taxed.
Flexible Withdrawals: Penalty-free withdrawals would be allowed at any time.
Annual Contribution Limits: Proposed limits around $10,000 per year .
Simplicity: Aimed at reducing complexity associated with savings accounts.
Encouraging Savings: USAs aim to boost personal savings rates in America.
Potential Outcomes:
Increased savings rates and wealth accumulation among Americans.
Reduced dependence on government programs through enhanced financial security.
6. Lowering Capital Gains and Indexing for Inflation
What is it?
Reduced taxes on investment profits.
Trump has proposed changes to capital gains taxes as part of his campaign.
Key Points:
Lowering Top Rate: Reducing long-term capital gains from 20% to 15%.
Indexing for Inflation: Adjusting purchase prices for inflation when calculating gains.
Possible Outcomes:
More attractive investment environment
Potential economic stimulation
Reduced Federal revenue from capital gains
Reduction in taxation on Wealthier segment of population
These changes aim to make investing more attractive while potentially stimulating economic activity by encouraging more investment. Many consider Capital Gains as a second taxation on money as the initial income to make the investment was already taxed. A reduction in Capital Gains is often seen as a gift to the wealthy as this tax is mostly on the higher end of the income tax bracket and is highly progressive.
Business Tax Reforms
7. Corporate Tax Rate Reduction
What is it?
Lower taxes for businesses.
Trump has proposed lowering the corporate tax rate from the current 21% to 20% or even 15% for companies that produce goods in the United States .
Key Points:
Lower rate Corporate Tax Rate to 20% or 15% for U.S. producers
Potential Outcomes:
A lower corporate tax rate could incentivize businesses to invest and expand operations within the U.S.
It might attract foreign investment and potentially lead to job creation.
Reductions in corporate taxes could lead to some combination of higher profits, lower consumer costs, higher employee wages, or higher investor returns.
Could lead to a reduction in Federal revenue and an increase in budget deficit if not offset by growth.
This proposal aims to enhance the competitiveness of U.S. businesses globally.
8. Repeal of Green Energy Tax Credits
What is it?
Removing tax incentives for clean energy.
Trump has proposed eliminating most of the clean-energy tax credits for businesses and individuals that were enacted under the 2022 Inflation Reduction Act .
Key Points:
Eliminate credits from 2022 Inflation Reduction Act
End Clean Energy subsidies
Potential Outcomes:
This could potentially slow the adoption of renewable energy technology, and impact the companies in this space.
It might reduce government spending in the short term.
Changes could hinder efforts to combat climate change and potentially affect job markets in the green energy sector.
This proposal reflects a shift in energy policy priorities. While it could reduce government spending in the short term, it may have long-term implications for the U.S. energy sector and environmental goals.
9. E Commerce Sales Tax Standardization
What is it?
Unified online sales tax rules.
Tax rates are different across state and local municipalities for online sales. This would create a National framework for online sales tax and simplify multi-state compliance for businesses.
Key Points:
Creates National framework for online sales tax
Simplify multi-state compliance for businesses.
Potential Outcomes:
Potentially increases state and local tax revenue.
Reduces compliance burden for businesses lowering their costs.
Trade, International Tax & Tariffs
10. Universal Import Tariffs
What is it?
Taxes on imported goods
An aspect of Trump’s plan is the proposal to impose a universal baseline tariff of 10% to 20% on all U.S. imports across the board, with a higher 60% tariff on goods imported from China . Whether this is a negotiating tactic to gain leverage over trading partners or a blanket statement is yet to be seen.
Key Points:
10-20% Tariff baseline on all imports
60% Tariff on Chinese goods
Potential Outcomes:
Increased tariffs could potentially protect domestic industries and boost American jobs and manufacturing.
Negotiating leverage that could lead to more fair trade deals with foreign partners.
May lead to higher consumer prices, inflation, and potential retaliation from trading partners which in turn could impact US growth.
The Peterson Institute for International Economics estimates that these tariffs could add $1,700 a year in additional costs for a typical middle-class household .
While tariffs could protect certain domestic industries, they may also lead to higher prices for consumers and potential trade conflicts. The impact on global supply chains and international relations could be significant, and is likely to be challenged by a number of countries and the WTO.
11. Enhanced Border Adjustment Tax (BAT)
What is it?
Tax imports, not exports
Essentially a value added tax (VAT) on imported goods requiring tax code changes, and border enforcement changes to account for the import of goods. Designed to protect domestic production of goods.
Key Points:
Taxes imports while exempting exports.
Possible Outcomes:
Protects domestic production.
Risk of consumer price increases and trade retaliation.
Higher compliance costs for businesses
12. Revocation of Global Tax Agreements
What is it?
Leaving international tax deals
In his first stint as President, Trump has show that he is willing to rock the apple cart and toss out new deals. Whether this is saber rattling to leverage new deals, or there is significant changes to existing trade deals is yet to be seen.
Key Points:
Exit or renegotiate OECD tax frameworks.
Exit or renegotiate individual or existing international trade agreements with various nations.
Shifts from Bi Lateral International tax focus to Sovereign tax focus.
Possible Outcomes:
Greater U.S. control of tax policy.
Potentially more favorable terms for US firms, and trade
Potentially inflationary if retaliatory policies put in place by foreign partners
A common theme under Trump’s proposal is the potential to protect domestic markets and products, and move to more Sovereign trade and tax policies. The net effect is yet to be determined, but is likely to have some inflationary effect, while simultaneously potentially improving existing deals.
Tax System Reform
13. Simplified Tax Filing
What is it?
Easier tax returns
Trump has emphasized simplifying the Federal tax code during his campaign. DOGE has discussed cutting regulations, the number of deductions, and even a flat tax.
Key Points:
Simplified Filing: Trump has proposed making tax filing easier by allowing more taxpayers to file their returns on a single form.
Reducing Deductions/Credits: By reducing deductions and credits, he aims for a less complex code.
Streamlining Business Taxes: Proposals include lowering corporate rates while simplifying business deductions .
Possible Outcomes:
Easier compliance for individuals and businesses.
Reduced costs filing taxes.
Improved tax system transparency
Many administrations have tried to simplify taxes, including making compliance and filing easier and free. While critics may argue that proposals like a flat tax will reduce the burden on the rich, others will call out that such proposals will have a minimum for those with large deductions, including from the ultra wealthy who may have enough deductions to pay zero taxes. Everyone consumer will cheer easier tax filing, and lower costs.
14. Abolishing the IRS for a National Sales Tax
What is it?
Replace income tax with sales tax
This would eliminate the IRS as an organization, and the need to collect income taxes altogether. It would be replaced by a Federal Sales Tax. Some will argue that sales taxes are regressive, so replacing the income tax with a sales tax will be more regressive for those in the lower income bracket. The counter is that the income tax system is already highly progressive and it is likely that higher income segments will continue to consume more and therefore pay higher taxes. This has yet to be determined the net effect of such a proposal.
Key Points:
Replace income tax with a flat-rate sales tax
Simplifies tax system.
Eliminates filing income taxes, and specific deductions
Possible Outcomes:
Potentially regressive impact on low-income households.
Eliminates the zero income tax filers that have offset all their income tax liabilities with write offs
Productivity boosts eliminating income tax filing
Possible implementation challenges.
While a Flat Tax, or “Fair Tax” has been discussed as a simplified income tax proposal for years, this would completely replace the byzantine set of tax code, deductions, and loopholes with a consumption based flat sales tax. It would shift the focus from income to consumption.
15. Revisiting SALT Deduction Limits
What is it?
Changing state and local tax deductions
In his first term this was considered either one of the most brilliant or evil political tax policies of his administration. In effect, wealthy states with high property prices were capped on mortgage deductions for high real estate areas. This in essence became a major change in wealthy coastal cities, and in essence a major tax increase for democratic “blue” states. This would potentially be a reversion to the pre Tax Cut and Jobs Act norm, or something closer.
Key Points:
Adjust or remove $10,000 cap on state and local tax (SALT) deductions.
Eliminate or reduce the focus on high-tax states
Possible Outcomes:
Relief for taxpayers in high-tax states.
Benefits wealthier households disproportionately.
Potential Federal revenue loss, but relief on State and Local Budgets constraint to raise taxes
Critics have pointed out that this tax targeted the wealthy, and blue states, and was in essence a double taxation since many states and local municipalities already have, substantial in some cases, property taxes. Some have pointed to this as supporting the migration from high tax (“Blue”) states to lower tax (“Red”) states. This would move to return closer to pre TCJA tax policies.
16. Revisiting Carried Interest Loophole
What is it?
Changing tax rules for fund managers
Most people will never deal with this, but Hedge Fund and other Investment Managers have “Carried Interest”, meaning they take a percentage of any market gains in the portfolio of investments they manage for customers. While this is part of their “pay, currently it is treated as an investment gain which is taxed as a Capital Gain. This means that they can pay a Capital Gains tax rate of say 20% versus what someone in that tax bracket might pay if it was taxed as ordinary income at say 37%.
Key Points:
Modify or maintain tax treatment of carried interest.
Controversial among policymakers. Technical, it is a capital gain on an investment, but it is also a form of pay/income to the fund managers.
Possible Outcomes:
Potential for small Federal tax gains
Potential benefits for higher tax rates on private equity and hedge fund managers.
This loophole has been criticized for benefiting wealthy investors, escaping their fair share of taxes on an income stream that most tax payers have no access to, and tends to hit the very top end of individual wealth.
17. “Made in America” Tax Credit
What is it?
Tax breaks for U.S. manufacturing
This would incentivize industry to build and source from the United States, potentially producing jobs and higher economic output, and protecting American industries. It could potentially also be inflationary if insourcing costs minus tax credits exceed the cost basis of global competitors.
Key Points:
Tax credits for goods entirely manufactured in the U.S.
Aligns with “America First” agenda to produce more goods and services in America
Possible Outcomes:
Encourages domestic manufacturing.
Risk of global trade conflicts.
Potentially inflationary costs
Another America first proposal that can have both positive domestic production, jobs, and output, as well as negative trade and inflationary outcomes.
18. Full Expensing for Business Investments
What is it?
Immediate tax write-offs for business purchases
Businesses can already write of many business expenses, but this would accelerate the write off. Details are sparse, but this may allow businesses to expand, purchase capital equipment quicker by realizing the economic benefits up front versus say spread over many years.
Key Points:
Permanent or expanded full deduction for capital expenditures.
Part of pro-business policies.
Possible Outcomes:
Increased business investments.
Potential acceleration of capital projects, and equipment and associated economic growth.
Reduction in Federal revenue in the short term, but evens out of the term of investment.
This is a very pro business stance that could spur significant growth and acceleration of capital investments. There would likely be short term Federal revenue fall due to proposals, but those are just typically brought forward on write offs business likely would have received over lifetime of capital expense so it just brings those forward.
19. Broadening Opportunity Zones
What is it?
Expanding tax breaks for investing in poor areas
The government for years has attempted to create “Opportunity zones” where additional tax incentives are available to spur additional investment into typically poor and under invested areas. Trump’s proposals in this area maybe an expansion of such programs.
Key Points:
Expand areas eligible for Opportunity Zone tax incentives.
Attracts investment in underserved areas.
Possible Outcomes:
Increased development in targeted regions.
Risk of gentrification and displacement.
As with all investments, they may improve the areas of investment, but not always of the lives of the people in those areas. In some cases, gentrification or urban renewal can be thought of as helpful, but in some cases it displaces the most needy making it harder or impossible for them to continue to support themselves in the improved areas. However, in general urban renewal is thought of positively, but to critics it has negative effects that disproportionately impact the poor.
20. Tax Incentives for Cryptocurrency Investments
What is it?
Tax breaks for digital currency investments
The details are light but it is clear that the income administration support Crypto currency, believe that it should be well defined and have a lower regulatory touch, and they would like the innovation and assets in the Crypto currency space to occur in the US.
Key Points:
Favorable tax treatment for digital assets/crypto.
Encourage innovation in blockchain technologies.
Regulatory support for digital assets.
Possible Outcomes:
Boost to the digital economy.
Support innovation and transition from Traditional Financial firms (TradFi) to Decentralized Finance (DeFi).
Tax evasion and regulatory concerns.
There is a lot wrapped up into crypto currencies, including the development of a US Central Bank Digital Currency (CBDC), the transition to more modern banking and financial mechanisms, as well as the impact on how the US regulates, manages, monitors, and asserts control over currency and capital including the US long term position as the Worlds Reserve Currency. We don’t know much, but that this administration seems willing to put their toes into the deep end of the pool, whether they jump in or not is to be seen.
Retirement and Savings
21. Retirement Tax Reforms
What is it?
Changes to retirement account rules
These are generally seen as positive helping individuals save more, and potentially earlier. There is likely to be some impact on Federal Revenues, but this is generally seen to help individuals save more of the money they earned to grow and develop over their working careers.
Key Points:
Higher contribution limits for retirement accounts.
Adjust Required Minimum Distribution (RMD) rules for retirees.
Possible Outcomes:
Increased retirement savings.
Longer term stability with more individuals reaching financial freedom and retirement stability.
Some reduction in federal tax revenue.
22. Enhanced Tax-Free Savings Accounts (USAs)
What is it?
New flexible savings accounts
This proposal could enhance savings, and allow folks to develop savings quicker, and minimize the effects of unplanned expenses for the most economically challenged. While critics will say this will disproportionately help wealthier individuals as they have the most money and hence would accrue therefore most of the benefits, this could greatly impact the savings and flexibility of those who are most in danger of severe financial consequences.
Key Points:
Tax Free growth on savings contributions
Flexibility for withdrawals, could be taken penalty free at anytime
Simplified contribution rules, up to $10,000 a year.
Possible Outcomes:
Encourages and promotes savings.
Reduced dependency on government aid.
Potential Federal Revenue impact and trade-offs.
23. Social Security Payroll Tax Deferrals or Cuts
What is it?
Temporary reduction in Social Security taxes
Details are light, but Trump implemented executive orders to defer some Payroll taxes during the COVID pandemic in 2020. He has discussed and may implement some form of Social Security payroll adjustment in the new administration.
Key Points:
Extend payroll tax holidays.
Reduce or eliminate payroll taxes temporarily.
Possible Outcomes:
Short-term relief for workers.
Concerns about Social Security fund sustainability.
Will this be a short term gimmick that will hurt in the long term, or will there be material changes that benefit the worker financially, too early to tell.
Summary
President Trump’s 2024 Tax Plan proposals represent a wide ranging set of policies with far-reaching economic consequences. In a challenging macro environment with Wars in Europe, growing large power tensions with China, large debts, growing deficits, and challenges to the implementation of his proposals make it difficult to predict how they may all play out. While much of the language and proposals maybe bravado and building negotiating leverage, other areas maybe more strategic long term plays against major global rivals including tariffs on China, the worlds manufacturing hub, are likely to be inflationary. While supporters argue these changes will stimulate economic growth to offset expenses, provide relief, and check geopolitical rivals; critics raise concerns about deficits, inflation, and trade wars.
Actual impacts will depend on implementation specifics & economic conditions at enactment including the incoming administrations highly publicized statements from the proposed Department of Government Efficiency (DOGE) to cut Federal spending by $2 trillion. The administration will need to carefully weigh benefits and risks against the long-term consequences. Ultimately balancing competing priorities—growth stimulation vs fiscal responsibility vs geopolitical positioning —will be crucial as discussions progress regarding these significant policy changes affecting the American economy & future stability. At the Tax Project we hope that the new administration will be transparent and continue to make the information available to allow the public to evaluate these changes with unbiased data.
Tax Project Institute is a fiscally sponsored project of MarinLink, a California non-profit corporation exempt from federal tax under section 501(c)(3) of the Internal Revenue Service #20-0879422.
