As part of his electoral tactics, the former president, Donald Trump has rolled out yet another set of tax policy policies. One of the central themes is that car loans should be made tax-deductible just like mortgages are. The objective of this concept is to allow working-class Americans to buy cars with ease. Being a car belt state which is predominantly supported by the automobile industry, Michigan is considered one of the key battleground states, and this is viewed as a tactic to win over the voters in that area.
According to Trump, allowing taxpayers to deduct the interest on car loans would encourage more families to purchase domestic geared vehicles while decreasing the economic strain on families. He painted this as part of a wider initiative geared towards the rehabilitation of the American automobile sector – a sector he claims was devastated by policies that encouraged moving manufacturing out of the country. Under Trump these trends would be reversed because jobs will return to the Michigans of this country.
Besides cars, Trump mentioned the ideas about removing the second taxation for the Americans who live outside the country. This is a problem, which affects millions of citizens of the United States. Currently, citizenship of the U.S. countries with overseas residency may require that taxation occurs in both the U.S. and the foreign country. Some measures alleviating such burdens are also offered, e.g. the Foreign Earned Income Exclusion which permits excluding foreign income below $126,500 from the taxable amount in the United States. Yet still, the policy affects the more affluent citizens of America who make higher income, and are thus generally double taxed.
Withdrawal from the existing system, if elected, will lessen the financial strains put on the expatriates. This idea could attract the 4.4 million Americans who are based outside the country, many of whom are of voting age. Nevertheless, analysts have pointed out that the primary gain from abolishing double taxations would be for the high-earning individuals. This is because low-earning expatriates are, to a large extent, already exempt from U.S. income tax on their foreign income.
Although these tax policies would entice certain constituencies, experts have some worry regarding the overall effect. For instance, Howard Gleckman from the Urban-Brookings Tax Policy Center shows skepticism on the rationale behind Trump’s proposal to limit the interest deduction for car loan only to car loans, not car payments as the proposal only applies to Americans that itemized their tax deductions. He indicated that the rationale is more likely political than dictated by economics.
In addition, Trump’s tax project is said to be most expensive. According to the Committee for a Responsible Federal Budget, implementation of this platform would add an additional $7.5 trillion to the national debt in the next 10 years. This is primarily attached to the numerous tax reductions Donald Trump has always called for including: dropping the tax on Social Security benefits and pay for tips and overtime workers.
Banning the existing $10,000 limit on the state and local tax deduction which was part of Trump’s 2017 Tax Cuts and Jobs Act. Nevertheless, such policies may be popular among the electorate, but there are likely to be negative effects on the economy in the long-term given the rising levels of national debt, which may be problematic for the country.
