Trump Tax Priorities Total $5 to $11 Trillion

In a closed-door meeting with House Leadership today President Trump reportedly outlined his tax priorities. According to press reports, they included extending the expiring pieces of the 2017 Tax Cuts and Jobs Act (TCJA); expanding the State and Local Tax (SALT) deduction; enacting tax breaks for goods made in America; cutting taxes on income from tips, overtime pay, and Social Security benefits; and eliminating tax breaks for carried interest and stadium owners.

Depending on the details of these proposals, our rough estimate is that a package of this nature would:

• Reduce revenue by $5.0 trillion to $11.2 trillion over ten years.
• Lower revenue by 1.3 to 3.0 percent of Gross Domestic Product (GDP).
• Boost debt to between 132 and 149 percent of GDP by 2035, if not offset, compared to nearly 100 percent today and 118 percent under current law.

Such a package could also lead to significant income shifting and tax avoidance, weaken the Medicare and possibly Social Security trust funds, dramatically boost interest costs, and increase the risk of a debt spiral.

Fiscal Impact of Trump’s Reported Tax Priorities (2026-2035)

Source: Committee for a Responsible Federal Budget, Largely based on estimated from The Fiscal Impact of the Harris and Trump Campaign Plans.
Note: All figures rounded to the nearest $50 billion.
# Less than $25 billion of savings. 
* Assumes 20 hours a month of overtime are exempt from income (but not payroll) taxes, and additional overtime pay remains taxable.
’ Assumes policymakers end taxation of the 35 percent of some benefits that goes to Medicare, but retain taxation of the 50 percent of some benefits that goes to Social Security.
 

Many of these reported priorities were proposed on the presidential campaign trail and we previously estimated in our paper “The Fiscal Impact of the Harris and Trump Campaign Plans.” The revenue implications of these proposals depend on design specifications and on how significant behavioral effects are. Our high-cost estimate of $11.2 trillion is based largely on the high-cost estimates in our campaign analysis. Our low-cost estimate of $5.0 trillion is based on the low-cost estimate but further assumes no changes are made to payroll taxes or the portion of Social Security benefit taxation that goes to the Social Security trust fund – as these changes would mostly not be allowed under reconciliation rules. Limiting our high-cost estimate to non-Social Security revenue sources would reduce it to about $9 trillion.

The largest part of the package is related to the TCJA. Extending the individual and estate tax elements of the TCJA that expire this year would reduce revenue by $3.9 trillion or up to $4.8 trillion if coupled with related business tax changes. And boosting the $10,000 cap on the deduction for SALT payments could lose anywhere from $200 billion to $1.2 trillion, depending on how aggressive the increase was.

Cutting taxes on tips, overtime, and Social Security can vary widely in expense, from $100 to $550 billon for taxes on tips, $150 billion to $3 trillion for taxes on overtime, and $550 billion to $1.5 trillion for taxes on Social Security benefits. Where the exact proposals fall within these ranges will depending on if these forms of income are exempt from taxation only for income taxes or for both income and payroll taxes, if these exemptions are subject to strict guardrails to limit cost and make it harder for taxpayers to reclassify income as tips and overtime, and how taxpayers react to these proposals.

Although there are no specifics on President Trump’s priority for reducing taxes on domestic goods, this could reflect his campaign proposal to lower the corporate tax rate to 15 percent for domestic manufacturing – or it could represent something more modest. We assume this would reduce revenue by $100 to $200 billion

Finally, President Trump has reportedly called for closing the carried interest loophole and “eliminat[ing] tax breaks for billionaire sports team owners." Assuming the latter refers to ending the tax benefit for some or all Private Activity Bonds (which are sometimes used to finance some professional sports stadiums), these changes could raise between $20 and $100 billion over a decade – enough to cover 0.2 to 1.8 percent of the tax cuts he reportedly outlined.

No discussion of further offsets – either on the tax or spending side – has been reported. Without offsets, debt under this proposal would rise from 100 percent of GDP at the beginning of 2026 to at least 132 percent of GDP and as much as 149 percent of GDP – nearly double or triple the growth over the next decade expected under current law to 118 percent of GDP.

Based on modifying our previous estimates of a $5.5 trillion package, this proposal could boost interest costs by $1.2 to $2.7 trillion over the next decade, driving annual net interest payments to record highs and risking a serious debt spiral.

As we’ve written before, some of these specific policies are also problematic in other ways – distributing windfalls to high-income households concentrated in a few states, worsening tax complexity, favoring certain profession and industries over others, leading to large amounts of tax avoidance and income reclassification, and advancing trust fund insolvency.

Regardless, the proposals would send federal debt to levels unprecedented in our history within only a few years. Policymakers should scale back and more carefully target their tax agenda and ensure that any tax cuts are part of a package to lower deficits. There are plenty of offsets available. Reconciliation should reduce, not add to, budget deficits.