Donald Trump is likely to overpromise and underdeliver on tax cuts
Loading player...
Washington — President Donald Trump is tapping his presidential authority to make tax changes that Congress is refusing to do, but his limited power means he could end up overpromising and underdelivering on his pledge to slash IRS bills.
Trump has deferred hundreds of billions of dollars worth of payroll tax payments and is contemplating another executive action that would amount to a roughly $100bn capital gains tax cut for investors by changing treasury department guidelines.
Trump is running for re-election in November trailing Democrat Joe Biden in every recent poll. Meanwhile, Congress is deadlocked on another stimulus as the country continues to struggle under a still-raging coronavirus pandemic. There are no immediate prospects for more negotiations and the stalemate could drag into September, leaving the economy limping as voters are getting ready to make their choices.
With a recovery key to Trump winning a second term, actions are aimed at giving a lift to both his working-class base and financial markets. But the tactic comes with a significant amount of political risk.
Those payroll tax payments will still come due unless Congress decides to forgive those amounts, which is no sure bet. Both Republican and Democratic leaders aren’t enthusiastic about slashing the levies that finance Social Security and Medicare.
Trump’s plan to cut capital gains taxes would involve executive action that some conservatives think may overstep his authority and end up in court. And the benefits, if they were to be realised, would be heavily tilted to the wealthy, giving Democrats another opportunity to attack Trump as favouring the rich at the expense of the middle class.
“With payroll taxes, administratively there is no way to make it work perfectly without Congress,” Kyle Pomerleau, a resident fellow at the American Enterprise Institute, said. “With capital gains, it could get tied up in the courts and it just never happens.”
With congressional talks at an impasse on another round of stimulus that economists, Federal Reserve officials and market participants all see as essential, Trump unilaterally extended extra unemployment aid and deferred payroll tax payments. When that failed to prod a resumption of talks, and analysts assessed its impact as limited, the S&P 500 turned sharply lower in the final hour of trading on Tuesday.
Some companies are waiting for guidance before deciding whether to take the risk of getting saddled with bills at the end of the year.
Matter of ...
Trump has deferred hundreds of billions of dollars worth of payroll tax payments and is contemplating another executive action that would amount to a roughly $100bn capital gains tax cut for investors by changing treasury department guidelines.
Trump is running for re-election in November trailing Democrat Joe Biden in every recent poll. Meanwhile, Congress is deadlocked on another stimulus as the country continues to struggle under a still-raging coronavirus pandemic. There are no immediate prospects for more negotiations and the stalemate could drag into September, leaving the economy limping as voters are getting ready to make their choices.
With a recovery key to Trump winning a second term, actions are aimed at giving a lift to both his working-class base and financial markets. But the tactic comes with a significant amount of political risk.
Those payroll tax payments will still come due unless Congress decides to forgive those amounts, which is no sure bet. Both Republican and Democratic leaders aren’t enthusiastic about slashing the levies that finance Social Security and Medicare.
Trump’s plan to cut capital gains taxes would involve executive action that some conservatives think may overstep his authority and end up in court. And the benefits, if they were to be realised, would be heavily tilted to the wealthy, giving Democrats another opportunity to attack Trump as favouring the rich at the expense of the middle class.
“With payroll taxes, administratively there is no way to make it work perfectly without Congress,” Kyle Pomerleau, a resident fellow at the American Enterprise Institute, said. “With capital gains, it could get tied up in the courts and it just never happens.”
With congressional talks at an impasse on another round of stimulus that economists, Federal Reserve officials and market participants all see as essential, Trump unilaterally extended extra unemployment aid and deferred payroll tax payments. When that failed to prod a resumption of talks, and analysts assessed its impact as limited, the S&P 500 turned sharply lower in the final hour of trading on Tuesday.
Some companies are waiting for guidance before deciding whether to take the risk of getting saddled with bills at the end of the year.
Matter of ...
