Trump’s tax bill will take us further down the road to ruin

President Trump’s One Big Beautiful Bill has an obvious theme: continuing to run up the national debt through upward redistribution of wealth and Pentagon overspending, while promising that it will lead to so much economic growth that it will actually create more tax revenue than it costs. The thing is, we’ve been running this bipartisan playbook for decades, including Trump’s first term. The result continues to be more crushing debt and a continued consolidation of wealth among the elite few, while too many Americans get left behind.

What is different this time is that the United States has finally reached the point where the costs of such unsustainable practices have arrived in the form of a downgraded credit rating, which means an even higher cost of borrowing. Furthermore, it risks the dollar's status as the world's reserve currency, the very thing that has allowed us to run massive deficits. What’s more, Trump’s plan will greatly accelerate the downward trajectory of tens of millions of Americans who are struggling just to exist, while dismantling the government’s ability to enforce regulations that might offer any sort of protection for our most vulnerable—the sick, the old, and the destitute. 

The bill would extend and, in many cases, expand tax breaks for the wealthiest Americans that were passed as temporary measures during Trump’s first term and were set to expire in 2025. This will add nearly $4 trillion to the national debt over the next decade, according to the non-partisan Congressional Budget Office. Republicans often sell the American public on the “dynamic effect,” an economic term referring to an increase in economic activity that can occur in certain instances when targeted tax cuts are implemented.

If tax cuts free up money to make new investments that create new jobs and increase spending, the tax revenue lost from the cuts can be offset or even surpassed by tax revenue from the new economic activity. However, while there is never a shortage of positive estimates from the anti-tax think tank crowd eager to refute CBO estimates, real economists know full well that dynamic effect rarely pays for deep cuts and is never achieved when taxes have been artificially low for decades and various incentives are in place that actually discourage that money from being spent in a way likely to create it.

Yes, you read that correctly, our taxes have been artificially low for decades. This is a simple appraisal in the sense that we haven’t balanced a budget in a quarter century. In other words, we have a certain amount of money that we are willing to tax out of the economy, and another amount that we insist on spending. For all that time, the latter has been greater than the former, which was clearly unsustainable and not offset by dynamic effect. However, in a world where a tax increase on the wealthy donor class has become completely verboten among both parties and military spending continues to grow exponentially, a ham-fisted bill like this one is what we can expect to get.

When George W. Bush took office in 2001, he actually inherited a budget surplus, which he could have used to shore up Social Security or invest in much-needed upgrades to the country's crumbling infrastructure. Instead, he passed deep, “temporary” tax cuts to stimulate an economy that was still recovering from the bursting of the dot-com bubble. Months later, 9/11 happened, and the United States embarked on two simultaneous large-scale wars.

In a departure from historic norms, Bush argued that not only could we not raise taxes to fund the war effort, we had to cut them even deeper, even as $12 billion a month went out the door for wars in Afghanistan and Iraq. The wars continued, and the debt continued to mount. In 2010, when those “temporary” tax cuts were set to expire, you can probably guess what happened. Allowing them to do so under a Democratic president was framed as a massive tax hike, and they were extended.

In 2012, modest changes were made, including the restoration of the top income tax rate to its Clinton-era level of 39.6 percent, which was still very low by historical standards. The budget deal, which was ultimately reached with President Obama’s support, made about 82 percent of the cost of the Bush tax cuts permanent. As for the dynamic effect, well, just look at our current national debt and tell me how that worked out.

Despite the ballooning deficits and the continuation of the forever wars, former Republican House Speaker Paul Ryan used the same dynamic effect argument when drafting the largest tax cut in U.S. history during the run up to the 2016 presidential election and, once elected, President Trump passed what was essentially Ryan’s plan with a few tweaks to create perks for favored industries. Trump added a record $7.8 billion to the national debt in his first term.

Yes, there was a worldwide pandemic, but how both Trump and Biden (the latter of whom added a whopping $7.6 billion to the debt in his term) “stimulated” the economy disproportionately benefited the wealthiest 1 percent of Americans even more than their tax policies. Both administrations' refusal to tax a commensurate amount of money out of the economy through policies like windfall taxes was a significant factor in Covid-era inflation.

Now, here we are, having crossed the long-warned red line in which the total debt exceeds our Gross Domestic Product, and we are being told once more by the so-called fiscally conservative party not to worry. Once again, we are promised that dynamic effect will offset the massive deficit we are about to add to the collective bill, leading us to unprecedented prosperity. What’s worse is that the cuts being made to pacify what passes for a deficit hawk in today’s Republican Party are among the cruelest and short-sighted imaginable.

Approximately $880 billion will be cut from Medicaid, resulting in around 10 million Americans losing coverage, while decimating many rural hospitals. The Affordable Care Act will get saddled with more red tape, while subsidies are allowed to lapse, causing millions of additional Americans to lose their health insurance coverage.

The bill will reduce the take-home incomes of the bottom 10 percent of earners by 4% by the end of the decade, according to the CBO. Most households earning less than $51,000 will immediately see their after-tax income decrease, according to a study by Penn Wharton, Trump's alma mater. Conversely, the top one percent will see their earnings go up by nearly $70,000 in the first year alone.

That's a collective $124 billion net tax cut for a single percentile that already holds a third of the country's collective wealth. Economists warn that passage of the bill will represent the largest upward transfer of wealth in U.S. history at a time when economic inequality has never been worse. There are a number of other asinine measures tucked into the bill, including giveaways to the oil and gas industry, while clean energy incentives, including tax credits on purchases of EVs and hybrids, are eliminated; a 10-year ban on any state or local efforts to regulate any aspect of artificial intelligence, and deep cuts to critical agencies like FEMA, the EPA and the IRS, as hundreds of billions are directed toward ICE and other deportation measures. 

When historians look back on the fall of the American empire, it will be a simple and familiar story. The country borrowed too much money to fight too many wars, while wealthy elites seized control of the levers of power, insisting that they never have to pay their fair share toward maintaining a system that allowed them to enjoy levels of prosperity never before seen on planet Earth. During the bill's early days, President Trump momentarily mused about raising taxes on just the wealthiest Americans. His fiscally conservative party balked, and he quickly dropped the idea. Until someone is brave enough to tackle the obvious solution, any talk of solving our debt problem is just whistling past the graveyard.

Dennis "Mitch" Maley is an editor and columnist for The Bradenton Times and the host of our weekly podcast. With over two decades of experience as a journalist, he has covered Manatee County government since 2010. He is a graduate of Shippensburg University and later served as a Captain in the U.S. Army. Click here for his bio. Mitch is also the author of three novels and a short story collection available here.