As the 2024 presidential election approaches, many Americans are wondering how another Trump presidency could affect their finances. With inflation still a major concern, it’s no surprise that people are curious about the potential financial impact of Trump’s economic policies.
To get a better understanding of how Trump’s policies might influence your income, we spoke with experts who highlighted six key areas that could be affected.
1. Tax-Free Tips: A Double-Edged Sword
One proposal that both Trump and Vice President Kamala Harris support is the idea of making tips tax-free. This change could be a significant boost for the estimated 4 million Americans working in tipped jobs, as they would take home more money.
However, experts have mixed feelings. Jenny Thorvaldson, IMPLAN’s chief economist, pointed out that while this could lead to more spending in other areas of the economy, it might also result in a $15 billion annual loss in GDP due to decreased tax revenue.
David Greiner, a business law expert, added that while servers would benefit from higher take-home pay, the government could see reduced funding for public services.
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2. No Student Loan Debt Forgiveness: A Potential Burden
Nearly 43 million Americans currently owe student loans, totaling $1.753 trillion as per Education Data Initiative. While the current administration has prioritized canceling student debt, Trump has criticized these efforts, calling Biden’s policy “vile.”
Russell Rosario, a financial expert, believes that not forgiving student loans could discourage higher education and limit social mobility.
Michael Schmied, a senior financial analyst, warns that this could have broader economic consequences, as people buried under debt would have less money to spend on homes, cars, or starting businesses, potentially slowing economic growth.
3. No Tax on Social Security: Relief or Risk?
Trump has also voiced support for eliminating taxes on Social Security benefits. This policy could provide immediate relief for seniors, allowing them to keep more of their income.
However, David Brillant, a tax lawyer, cautions that this could worsen the already underfunded Social Security program, potentially leading to benefit cuts or future tax increases.
Nischay Rawal, a CPA, agrees, noting that while it might offer temporary relief, it could reduce the revenue needed for essential programs like Medicare.
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4. Child Tax Credit: Boosting Family Finances
Trump has proposed increasing the Child Tax Credit from $2,000 per child to $5,000. This increase would provide significant financial help to families, especially those with young children.
Bill Boersma, an insurance expert, notes that while this policy would boost local economies in the short term as families spend more, it could also reduce tax revenue or increase the federal deficit.
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5. Extending the Tax Cuts and Jobs Act of 2017: A Mixed Bag
The Tax Cuts and Jobs Act (TCJA) of 2017, enacted during Trump’s previous term, was a major overhaul of the tax code that benefited businesses and high-income individuals. If re-elected, Trump could extend this act, which is set to expire in 2025.
Michael Schmied explains that while the TCJA spurred business investment and economic growth, it also contributed to widening income inequality, with middle- and lower-income Americans seeing fewer benefits.
David Fritch, an attorney and CPA, adds that more tax relief is needed for middle-income families, as the 2017 tax cuts primarily benefited large corporations and wealthy individuals.
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6. Tariffs: Protecting Jobs or Raising Costs?
Trump has proposed a 10% universal tariff on all U.S. imports, aiming to protect American jobs. While this might benefit some domestic industries, experts warn it could also raise consumer prices and strain international relations.
David Fritch points out that broad tariffs could slow economic growth and lead to retaliatory tariffs on U.S. exports. Greiner, a transactional law expert, shares concerns about higher living costs and the potential negative impact on businesses and consumers.
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Final Thoughts
As the election draws nearer, the potential impact of Trump’s policies on your income is a hot topic. Whether it’s tax changes, student loan policies, or tariffs, each of these areas could significantly influence your financial future. It’s important to stay informed and consider how these policies might affect you personally.