The Trump economy is already humming. The U.S./China trade deal has achieved Phase 1, the stock market is trading at record highs, and inflation is at bay. As if a Goldilocks economy weren’t enough, a repeat victory for Donald Trump in 2020 could translate into more permanent tax cuts for Americans.
The Tax Cuts and Jobs Act (TCJA) of 2017 already has President Trump’s handiwork all over it. The bill is touted as “the biggest tax overhaul in the United States in over 30 years,” as described by the Tax Policy Center’s William Gale. And while the lion’s share of the tweaks in TCJA are written in stone on the corporate side, many of the benefits designed for the individual are more temporary in nature.
As a result, a Trump victory in 2020 could lead to more changes to the tax code, this time targeting individuals, in a wave that Wells Fargo in a note to clients calls Tax Cuts 2.0. The Wells Fargo report states:
A second term for President Trump would likely include a focus on some form of Tax Cuts 2.0.
According to the Wells Fargo report, Tax Cuts 2.0 won’t be presented as another sweeping overhaul to the tax code. Instead, the changes will likely address the expiration of recent updates such as “individual tax rate reductions and the doubling of the standard deduction,” both of which expire at year-end 2025.
Next time, President Trump would likely make it a priority to secure these changes so that they’re permanent before his second term is up in 2024, which would likely be cheered by Republicans in Congress. Wells Fargo suggests that Tax Cuts 2.0 could also address the following
Eliminating some ACA taxes
Indexing capital gains to inflation
Expanding saving vehicles like 529 education accounts
The Monthly Treasury Statement suggests that the U.S. government collected a record taxes in October and November, the first two months of fiscal 2020, with the total revenues surpassing $470 billion.
Those gains, however, were offset by spending of more than $8 billion in the period, placing the U.S. government in the red by more than $343 billion.
By the same token, the projected cost of Trump’s tax cuts have fallen sharply since prior to his election in 2016. In 2015, the Tax Policy Center expected Trump’s then-promised tax cuts to slash federal revenues by more than $9 trillion over a decade. That amount, as estimated by the Joint Committee on Taxation, has since come down to $1.5 trillion over the same period based on the reality of TCJA.