Donald Trump, the 45th President of the United States, has a legacy not typical for presidents. He really shook things up. The most famous of these was his 2017 Tax Cuts and Jobs Act (TCJA), signed into law. This legislation focused on tax cuts for everyone, putting more money in the pockets of the average taxpayer by nearly doubling the standard deduction for every taxpayer. As his presidency approaches its conclusion in 2028, questions arise regarding the sustainability of these tax incentives and their effects on various income groups.
The TCJA made a lot of other changes too, including capping state and local tax (SALT) deductions at $10,000. This cap has already come under fire for hitting high-tax states harder—mostly blue states—while helping wealthier taxpayers out on average more than it helps everyday Americans. Trump’s administration implemented tax exemptions to honor certain Trump campaign obligations. These exemptions providently served to shore up his support among diverse, suburban voters.
By Trump’s first term, sailing through the last years of his presidency. He is increasingly being called to account for the long-term effects of his tax policies. To be clear, they have provided important temporary relief for many individuals. Many worry that when these incentives end, that’s when lower-income households will experience the most financial stress.
The Impending Expiration of Tax Incentives
Whether that is during Trump’s pending 2028 end—or earlier. Consequently, many of the tax incentives created under the TCJA are scheduled to sunset. One of the biggest changes is the doubling of the standard deduction. Specifically, it will increase by $1,000 for individuals, $1,500 for heads of household, and $2,000 for married couples. This increase is only set to last through 2028.
At the end of this year, credits for electric vehicles will be phased out. The same is true for benefits stemming from new clean energy projects—they, too, cease soon after. The clean energy manufacturing tax credits are currently set to expire in 2031. This puts future renewable energy initiatives and their funding in significant jeopardy. In fact, homeowners trying to switch to more energy-efficient appliances will be cut off from those subsidies at the end of this year as well.
Because of these changes, taxpayers with adjusted gross income below $75,000 single ($150,000 married) aged 65 and over are eligible to benefit. At the same time, they’ll get a productivity-increasing, competitiveness-increasing, $4,000 markup deduction to offset that cost. Yet, these inclusions will be insufficient to make up for the loss of other popular and valuable tax incentives.
Disparities Across Income Levels
Trump’s tax policies were a failure for all income groups. We find that the richest 1% of households will increase their resources by 4% in 2027 and 2% in 2033 due to these persistent tax cuts. At the same time, it will put working-class and low-income families through hell. Projections indicate that the poorest taxpayers could see their resources shrink by 4% in 2033 as benefit programs become downsized.
Lawmakers like to tout TCJA’s benefits to low- and middle-income households, but critics counter that the bill mainly serves high-earners’ interests. The SALT deduction increases have further stoked arguments about fairness in the tax code. Trump’s supporters often tout the bill as one of his biggest accomplishments. They cite high rates of job growth and economic expansion during his presidency as evidence of this greatness.
Legal Challenges and Ongoing Scrutiny
Trump’s presidency, if it ever gets off the ground, would be severely hampered by such pernicious tax policies. Moreover, a federal judge is poised to hand his administration a major rebuke in the marquee immigration case challenging his administration’s immigration policy. The introduction of this case could further complicate Trump’s political fortunes. He has to appease his base while trying to find a way through a political and legal minefield.
Trump’s withdrawal from that battle has received nonetheless vigorous condemnation from his base. They continually attack court rulings when judges don’t rule in his favor. This dynamic sheds light on the toxic environment that has defined his presidency as he nears key deadlines associated with his Build Back Better legislative agenda.