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Presumptive Republican presidential nominee Donald Trump has indicated to his advisers that he favors a new tax cut for the middle class if he is elected in November, according to a media report. Such a move could further widen the already massive US budget deficit.
The advisers discussed the idea of reducing the federal payroll tax rate with the former president, Reuters reported, citing a person familiar with the talks. This method of cutting taxes, however, could reduce the amount of money flowing into Social Security and Medicare funds if the proposal does not include any changes to offset the reduction in income.
Trump has indicated he is open to lowering the federal payroll tax for middle-income taxpayers, but has not made any commitments, he told Reuters.
Any substantial changes to the tax code would require approval from lawmakers, so the cut would also depend on the makeup of Congress in 2025.
In August 2020, Trump had implemented a payroll tax holiday through an executive order and had “seriously” considered a 20% capital gains tax cut for the middle class, which was not implemented.
According to the U.S. Treasury, total federal government debt stood at $34.0 trillion as of March 31, 2024, up from $23.2 trillion as of March 31, 2020 and $19.8 trillion as of March 31. March 2017.
On Tuesday, the International Monetary Fund’s Fiscal Monitor Report highlighted that further progress in reducing inflation will be difficult as long as the government spends freely, increasing budget deficits. “Loose fiscal policy and rising debt levels, as well as tightening monetary policy, have contributed to rising long-term government yields and their greater volatility in the United States, raising risks elsewhere through spillovers to interest rates,” the report states.
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