The
Potential Impact of a Second Trump Term on Your Taxes
Many people are already unsure of
which of Donald J. Trump's campaign pledges will truly be fulfilled as the
country adjusts to the realities of another Trump administration.
Here are some possible changes to tax policy based on Trump's campaign
statements and past performance in power, while it is impossible to predict
which of his proposed policies will really be implemented.
Reductions
in Corporate Income Tax
Trump also pledged during his
campaign to drastically lower corporate income taxes for businesses that
produce goods in the United States, from 21% to 20% or possibly 15%.
When the Republican tax overhaul, officially known as the Tax Cuts and Jobs Act
of 2017, was enacted into law during his first term, he fought to reduce the
corporate tax rate from 35% to 21%.
Reform
of Individual Taxation
Trump suggests four changes to
personal taxation:
1. Continuing the 2017 Tax Cuts and
Jobs Act
The extension of the child tax credit and the doubling of the standard deduction were two of the most significant changes made to the tax law for individual taxpayers. The majority of the tax cuts are scheduled to expire at the end of
2025, and only a small number are permanent.
Starting next year, both people and corporations may have to pay higher taxes
unless Congress chooses to extend them. However, Trump ran on a platform of
making the 2017 Republican tax overhaul's features permanent as well as
prolonging them.
2. Tips Are Tax-Free
The same taxes that apply to ordinary earnings also apply to tips since they
are taxable income. Employees who receive tips report them to their employers,
who then include them in their Social Security and Medicare taxes as well as
their gross income and federal incomes that are withheld.
Trump wants to end this practice so
that wage earners are not have to pay tip taxes, similar to Vice President
Kamala Harris's campaign pledge.
3. Benefits from Social Security
On the campaign trail, Trump said he felt sorry for the elderly who have been
"decimated on fixed incomes" because of inflation. He wants to do
away with taxes on Social Security income because of this.
4. Taxes and Overtime Compensation
Time-and-a-half, sometimes known as overtime pay, is remuneration for hours
performed in excess of the typical 40-hour workweek. In addition to Social
Security and Medicare taxes, this compensation is subject to both federal and
state income taxes.
Paying overtime can sometimes push wage earners into a higher tax bracket,
raise their marginal tax rate, and even offset the initial benefits of working
overtime.
It is Trump's intention to halt this
practice in order to "deliver gigantic tax cuts to working families."
According to the theory, it might encourage people to put in more hours, which
would be advantageous for businesses and their staff.
