White House press secretary Karoline Leavitt said Thursday that President Donald Trump wants the “largest tax cuts in history” for Americans in the middle class.
Leavitt made her announcement while Trump met with congressional leaders at the White House to negotiate what will be included in a budget reconciliation bill that is expected to include various tax reforms.
Congress passed the 2017 Tax Cuts and Jobs Act during Trump’s first term through the budget reconciliation process.
The president has stated he would like to see those tax cuts, the majority of which expire next year, be made permanent.
The Wall Street Journal reported that some congressional Republicans are eyeing a five-year extension in order to keep costs down for when the bill is scored by the Congressional Budget Office, which uses a 10-year time window.
“Would [Trump] sign a bill that just has a five-year extension?” a reporter asked Leavitt.
The press secretary did not answer the question directly but said the president has several tax priorities for Congress to include in the legislation.
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“No tax on tips, which is obviously a very public campaign promise the president made,” Leavitt said. “No tax on seniors’ Social Security. No tax on overtime pay. Renewing President Trump’s 2017 middle-class tax cuts.
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“Adjusting the SALT cap. Eliminate all the special tax breaks for billionaire sports team owners. Close the carried interest tax deduction loophole. Tax cuts for made-in-America products.
“This will be the largest tax cut in history for middle-class, working Americans,” Leavitt said. “The president is committed to working with Congress to get this done.”
The first three regarding tips, Social Security payments, and overtime pay are self-explanatory.
A primary middle-class aspect of the 2017 tax cuts was nearly doubling the standard deduction from $6,500 for single filers and $9,500 for married filers to $12,400 and $24,800. In other words, any money earned up to those amounts is federal income tax-free.
Additionally, the legislation doubled the child tax credit from $1,000 to $2,000 per child. A tax credit is applied directly to whatever tax bill a taxpayer owes, reducing it by that amount.
Further, up to $1,400 of the credit is refundable. That means, if a taxpayer owes the federal government $1,000 and has one child, the $2,000 tax credit pays the entire bill and the filer still receives an additional $400 as a tax refund.
The SALT cap Leavitt referred to is the amount of state and local taxes taxpayers can use as a deduction toward the federal taxes owed when itemizing deductions instead of taking the standard amount.
Taxpayers who have several larger deductions — including for mortgage interest payments, charitable contributions, etc. — can exceed the standard deduction amount.
The Tax Cuts and Jobs Act set a cap of $10,000 for deducting state and local taxes, which was felt more by taxpayers from high-tax states like California, New York and New Jersey.
Republican congressional members from those states will want a higher cap in exchange for their votes, Roll Call reported, and Leavitt was communicating that Trump is on board with that.
Next, “The carried interest deduction allows investment managers to pay a lower capital gains tax rate on the income they receive from their work as compensation. It’s no small matter, with many capital gains subject to 23.8% taxes while the rate for regular wage income can be double that,” according to Yahoo Finance.
According to Bloomberg, Leavitt’s comments Thursday were the first public mention by the Trump administration of either closing the carried interest deduction or ending special tax breaks for sports team owners.
Finally, Leavitt’s reference to tax cuts for American-made products is regarding a campaign proposal Trump made while speaking to the Economic Club of New York in September.
His plan calls for “a reduction in the corporate tax rate from 21 percent to 15 percent, solely for companies that make their product in America.”
Trump argued that this policy would encourage more manufacturing to take place in the U.S. and thereby create more jobs.
Economists from Harvard, Princeton, the University of Chicago and the U.S. Treasury concluded in a 2023 report the Trump corporate tax reform worked as advertised in terms of stimulating economic growth.
The Wall Street Journal’s James Freeman wrote in a summary of the 51-page National Bureau of Economic Research report that the 2017 Tax Cuts and Jobs Act created a surge in business investment, which greatly benefited the economy.
The Trump tax cuts permanently reduced the corporate tax rate from 35 percent — the highest in the industrialized world — to 21 percent, which is slightly below average among developed countries.
The new business activity spurred by the lower tax rates sent corporate tax revenues from approximately $230 billion in 2017 to $445 billion in 2023.
The Hill reported that House Speaker Mike Johnson said the hours-long meeting between Trump and GOP lawmakers Thursday went well, and he anticipates the House Budget Committee could begin working on a budget resolution as early as next week.
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