House’s “Big Beautiful” Bill for Trump Will Take U.S. Over the Cliff

Days ago the House came forth with a budget resolution that makes clear that Republicans have no concern at all for the nation’s future. Given how
subservient Speaker Mike Johnson is to President Trump, we can be sure that the House plan is closely aligned with the president’s often expressed desires. Trump bellowed on Truth Social,

"We need both Chambers to pass the House Budget to ‘kickstart’ the Reconciliation process, and move all of our priorities to the concept of, 'ONE BIG BEAUTIFUL BILL.'”

With the country flying past $36 trillion in debt, Trump plans still more tax cuts, beyond extending his 2017 cuts, which will be the fourth set in this quarter century, all by Republican administrations. The House resolution obliges Trump by deliberately allowing for cuts costing an alarming $4.5 trillion over the decade to come.

Money in the budget cannot be found to backfill that bunker busting crater, and the plan hasn’t figured out where to start. Johnson has simply directed the various committees to come up with $1.5 to $2.0 trillion in savings across the next ten years. Even if that were somehow possible, it still leaves as much as a $3 trillion shortfall. And, by the way, committees, stay clear of defense because, to make your task a bit more difficult, the House is voting for an added $100 billion, up from this year’s $849.9 billion defense budget.

Most significantly, the Energy and Commerce Committee, which handles health care spending, is asked to cut $880 billion over the decade and that unmistakably takes aim at Medicaid at least. Trump has vowed many times over that Social Security and Medicare will not be disturbed. In an interview this Target Article: week by Fox News’ Sean Hannity, Trump said:

”Social Security won’t be touched...Medicare, Medicaid — none of that stuff is gonna be touched.”

The mention of Medicaid may have been a slip, or it revealed that the president doesn’t know what’s happening. Hours later, probably advised that Republicans are already working on huge cuts to Medicaid, Trump embraced the House resolution saying it,

"implements my FULL America First Agenda, EVERYTHING, not just parts of it.”

Slashing Medicaid to pay for additional tax cuts for the wealthy and corporations will affect tens of millions of poorer Americans who will discover that they have served Trump’s purpose in getting him re-elected and will now be left at the side of the road.

Republicans won’t stop at eviscerating Medicaid. They surely also have their eye on the subsidies paid to Americans under the Affordable Care Act to help them pay for health insurance. Trump tried twice to kill Obamacare, finally defeated in a late night dramatic tie-breaking vote by Senator John McCain. It’s an odds on bet that Trump will try again. Left with no affordable insurance options may wake his voters that they’ve been betrayed.

Trump and Republicans have every intention to extend the 2017 Tax Cuts and Jobs Act. Elements of the Act are due to expire in 2026. It was passed under the Senate’s filibuster-proof “reconciliation” rule that requires only a simple majority but is limited to a lifespan of 10 years. Its extension will add $4.6 trillion to government debt over the next decade according to a Congressional Budget Office estimate of last May.

The House resolution that provides $4.5 trillion in tax cuts is so far unspecific what will make up those cuts, and so no mention is made of its encompassing the extension of the 2017 cuts. How can it? Its $4.6 billion would swamp the $4.5 trillion in its entirety, blocking the further tax cuts that Trump wants. That says that the 2017 extensions are separate, unaccounted for – and a colossal extra. Our guess is that they are not even viewed as tax “cuts” by House Republicans, just as a continuance of the status quo, so best not to draw attention. But its $4.6 trillion doubles tax cut costs to a crushing $9 trillion and makes the House resolution a fraud. There is not a word of this in the media. It hasn’t been discovered, except evidently by The Committee for a Responsible Federal Budget which projected during the campaign that Trump’s tax and spending plans are so out of hand that they could cost as much as $15.15 trillion.

Trump expects new tax cuts and the House has obliged with the $4.5 trillion, most of it adding to the national debt. For individuals we will presumably see the tax brackets once again whittled down so that the wealthy 10% are handed the biggest cuts and the 90% are handed token savings to distract them from the fleecing, just as in 2017. That reform reduced taxes by less than 2% for 80% of taxpayers, averaging about $1,000 a household, but gave almost $9,000 in breaks for the top 20%, and over $70,000 to the top 1%.

But chief among the cuts will be Trump’s demand that corporate taxes – already cut in 2017 by a whopping 40%, reducing the rate of 35% to 21% — be cut yet again to only 15%.

Finally, there are all the other tax cuts that Trump pledged on the campaign trail, and his MAGA followers will tell you that they voted for him because Donald Trump keeps his promises. Are all their sizeable costs covered by the already huge hole created by the $4.5 trillion tax cut allowance, or will insanity take over?

No Income Taxes at All: OK, not a promise, but for the record we should at least record Trump’s wish to return to the 19th Century when there was no income tax and where he found his new favorite president (jilting Andrew Jackson) William McKinley, whose government was funded by tariffs. The income tax didn’t begin until 2013 with the 16th Amendment to the Constitution. Last October on Fox News, Trump lamented,

"It had all tariffs. It didn't have an income tax. Now we have income taxes and we have people that are dying. They're paying tax and they don't have money to pay the tax."

The U.S. imports less than $4 trillion in goods annually and collects $3.5 trillion in individual income taxes, which means it would take tariff rates of almost 90% to replace the income t ax. And just to put a finer point on it, at that rate, imports would decline for being too costly and so would tariff proceeds. Mr. Trump clearly has not done the math.

No Tax on Social Security Benefits: In a bid to win the vote of the over-65 age group, Trump proclaimed on Truth Social in August that “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!”. The Wall Street Journal editorialized,

"We favor lower taxes as a matter of principle, but not all tax cuts have equal benefit. And this one is likely to backfire in spectacular fiscal and economic ways."

In the current year, taxing benefits raised about $94 billion for the Treasury, but the government would sacrifice far more if Trump as his way.

Why? The tax is calculated on an individual's income and benefits above fixed dollar thresholds. But while the thresholds are fixed, the benefits
above those thresholds rise every year because Social Security benefits are indexed for inflation; seniors receive more every year. The outcome is that Trump's elimination of the tax on benefits would run from $1.6 to $1.8 trillion in lost government revenue over the next 10 years — and would hasten the insolvency of Social Security as well.

Seniors already enjoy advantages: Anyone over 65 gets a higher standard deduction. Social Security benefits aren’t taxed at all for those with lower incomes. Even for those with higher incomes, 15% of benefits are not subjected to tax in recognition that we have already paid income tax on the deductions from our paychecks that went to the Social Security administration. And most of all, owing to increased longevity, the amount of benefits that a high percentage seniors receive far exceeds what they paid in over their working years.

No Taxes on Tips: It all stems from a waitress in Las Vegas airing her grievances to Trump, who immediately seized on waiving taxes on tip income as a way to buy votes.

“For those hotel workers and people that get tips, you’re going to be very happy, because when I get to office, we are going to not charge taxes on tips.”

A Journal editorial last June reacted with…

“…[I]t’s too bad he’s now floating special-favor tax ideas…The political play for working-class voters is blatant.”

The Republican Party embraced it in its platform. House Speaker and Trump sycophant Mike Johnson said he would “pass it as soon as we can”.

The Committee for a Responsible Federal Budget figures the exemption would cost the federal fisc at least $150 to $250 billion over 10 years. But that doesn’t count the distortion of potentially millions of businesses re-classifying pay as tax-free tips as a way to pay lower wages. And as the Journal further said, "Soon your plumber, accountant and child’s tennis coach will want to be paid in tips."

But above all, why should those earning part of their income in tips be anointed as a special class. As Quin Hillyer at the conservative Washington Examiner asked,

”Why should a waiter not pay taxes on an essential part of his earnings while a welder still pays on all of his?"

No Taxes on Overtime Pay: In September, Mr. Trump floated the idea of exempting taxes on overtime pay for work beyond 40 hours a week. The Tax Foundation estimates this carve-out would cost between $680 billion and $3.1 trillion over a decade depending on how it is structured: e.g., would payroll taxes (for Social Security and Medicare ) not be withheld on overtime pay all year long, or would it only be a deduction on form 1040 at tax filing time?

Either way, what’s the justification? Overtime is already rewarded by federal law at one-and-a-half times regular pay. What is it about overtime pay that merits special tax treatment to boot? It certainly looks like Trump is buying the votes of police forces across America, the police being adept at padding their income with overtime.

End Cap on State and Local Tax Deduction: Those who itemize deductions on their tax returns were limited to a maximum of $10,000 of their state and local taxes (acronym SALT) by Trump’s 2017 Tax Cuts and Jobs Act (TCJA). An individual’s SALT costs would become fully deductible again in the unlikely event the 2017 Act’s cuts are let to expire. But despite TCJA's planned extension, and the need for the cap to somewhat pay for its lost revenue, candidate Trump at a rally on Long Island last September pledged to end the limit anyway and allow full deduction of SALT.

Many lawmakers wish to at least raise the cap to $20,000.for married filers. That doubling would reduce federal revenue by $225 billion over 10 years according to the Tax Policy Center. Elimination of the cap altogether to please Trump as part of extending the 2017 Act, would cost the government more than $1 trillion.

Deductible Car Loan Interest: Speaking at the Detroit Club last October, Mr. Trump announced a tax deduction for interest paid on car loans. That would cost the government about $61 billion across 10 years.

No Income Tax on Americans Living Abroad: Another Trump campaign promise says that Americans living and earning their income abroad should not have to pay taxes to the U.S.

In the usual case, an expatriate pays to the U.S. only the amount that U.S. income tax exceeds the income tax paid to the country where he or she is domiciled. Still, expats hate the paperwork burden of having to file under two jurisdictions.

One could argue that if you are a U.S. citizen, and choose to retain your U.S. citizenship, you owe taxes to the U.S. wherever you are. Besides, ending the requirement would see an outflow of wealthy Americans moving to tax havens overseas. But in all of the cases we cite, Trump never thinks through the knock-on effects. Or is he setting up for a tax-free future for the Trump clan?

The reckless plunge into further debt is sure to cause increasing consternation around a world in which the U.S. dollar is the reserve currency. It will hasten the moment when central banks begin to unload U.S. treasuries and move funds elsewhere. As the U.S. then finds it increasingly difficult to raise money to finance its ever-increasing annual deficits, it will need to offer ever-higher interest rates to compensate for a declining dollar brought about by our country’s reckless policies. Interest costs already exceed the defense budget. Republicans obviously don’t care. A bemused Ben Stein was a Nixon economics adviser when he came up with the oft-quoted truism "If something cannot go on forever, it will stop." It will stop in a cataclysmic crash when the U.S. goes over a fiscal cliff.