A new analysis by a budget watchdog group has projected that former President Donald Trump’s proposed tax cuts could result in a loss of between $5 trillion and $11.2 trillion in federal revenue over the next decade.
The Committee for a Responsible Federal Budget, an organization that advocates for reducing deficits, identified the primary source of this revenue loss as the extension of the 2017 tax cuts for individuals and small businesses. These cuts are set to expire at the end of 2025. The group warned that Trump’s overall tax strategy could “explode” the national debt and lead to “a serious debt spiral” unless offset by spending reductions or tax hikes elsewhere.
The analysis highlighted that the precise cost of Trump’s tax proposals depends on details of the provisions, some of which have yet to be finalized.
During a closed-door meeting with House Republican leaders on Thursday, Trump outlined his tax priorities, which included eliminating taxes on tips, overtime pay, and Social Security benefits. He also proposed new tax breaks for products manufactured within the United States. Additionally, he suggested lifting the cap on the state and local tax (SALT) deduction, which his 2017 tax law had set at $10,000 per household.
While Trump has proposed certain tax increases—such as eliminating the carried interest deduction and ending tax benefits for sports team owners—these changes would only have a minor impact on reducing the deficit, the committee estimated.
If the proposed tax cuts are implemented without corresponding tax increases or spending cuts, the national debt could rise significantly, reaching between 132% and 149% of gross domestic product (GDP) by 2035. This is a sharp increase from the current level of nearly 100% of GDP and an estimated 118% within a decade if tax laws remain unchanged, according to the committee’s projections. Even without Trump’s proposed tax cuts, the national debt is expected to climb due to the increasing costs of Social Security and Medicare benefits for the retiring Baby Boomer generation, as well as interest payments on existing debt.
House Republicans are working on a budget plan to advance Trump’s agenda, but disagreements persist over the extent of spending cuts needed to offset revenue losses and which programs should be targeted.
Meanwhile, Senate Republicans are preparing to move forward next week with a $300 billion spending plan focused on strengthening border security and defense. However, they plan to delay addressing tax policy and other contentious issues that have divided the party until later in the year.