When political and economic analysts attempt to discern US President Donald Trump’s endgame, they often presume it is consistent with “Make America Great Again”, “America first”, “peace through strength” and whatever else he said on the campaign trail. But that is only part of the story. What has been left out is his unspoken agenda, which includes four basic things.
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The first, of course, is the further enrichment of himself, his family and the wealthy at the expense of the less fortunate – Robin Hood in reverse. The benefits of the theoretical “trickle-down” tax cuts from his first term did not trickle down. The Tax Policy Centre estimated that in 2018, the top 20 per cent of income earners received 65 per cent of the tax benefits, while the bottom 80 per cent received 35 per cent.
If the cuts are renewed, the top 0.1 per cent of income earners could receive an average tax reduction of US$314,000, costing the government US$4.2 trillion between 2026 and 2035.
As for Trump’s focus on deregulation, while the efforts of the Trump administration initiative the Department of Government Efficiency are estimated to save billions, they will not come close to generating sufficient savings to pay for a renewal of the tax cuts.
This leads to the second unspoken objective: replacing the income from taxes with income from tariffs (or, in other words, making tariffs permanent and the United States completely dependent upon them for revenue), while seriously impairing the Internal Revenue Service. The Trump administration has so far imposed tariffs on imports such as steel and aluminium, with the aim of protecting domestic industries, but such measures lead to higher prices for consumer goods, disproportionately affecting lower-income households. While the tariffs generate revenue, they effectively function as a regressive tax on the working class and the poor, widening income disparity.
In the 2023 financial year, the Internal Revenue Service generated around US$5 trillion in revenue from various forms of taxes. How much can US tariffs generate?
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