Tip Duty-Free 340 Trillion in 10 Years... Child Tax System 2721 Trillion
"No Consideration of Tax Burden Transfer"
With the U.S. presidential election approaching this November, former President Donald Trump and Vice President Kamala Harris are competing to win voters' support through 'populist' tax cut pledges, raising concerns about government finances, Bloomberg reported on the 13th (local time).
On November 10th, Vice President Harris announced during a campaign rally in the battleground state of Nevada that she would not tax income earned from tips. Nevada is a state with the highest number of service industry workers and a high dependence on tips. Earlier, former President Trump had also announced a similar tip tax exemption pledge in June.
If the tip tax exemption proposed by former President Trump is implemented, government revenue is estimated to decrease by about $250 billion (approximately 340 trillion won) over the next 10 years. Vice President Harris's proposal is estimated to reduce revenue by about half that amount. Harris's plan applies the exemption only to federal income tax. The Associated Press expressed concerns that high-income workers might evade taxes by converting part of their wages into tips.
These populist tax cut pledges do not stop there. Republican vice-presidential candidate Senator J.D. Vance recently stated in an interview with CBS that he would expand the child tax credit to $5,000 (approximately 6.8 million won) per child. This is $3,000 more than the current credit amount and larger than President Joe Biden's proposal. Considering that only three Republican senators supported a similar bill recently discussed in the Senate, this contradicts the existing Republican stance.
Bloomberg estimated that expanding the child tax credit would require $2 trillion (approximately 2,721 trillion won) over the next 10 years. It also pointed out that if such tax credits are implemented without income limits, the benefits of the tax credit law originally designed to prevent poverty could have a reverse effect, favoring middle- and high-income households.
Mark Goldwein of the non-profit Committee for a Responsible Federal Budget (CRFB) said, "President Biden wants a child tax credit, Senator Vance wants a larger child tax credit, and since former President Trump talks about tip tax exemptions, Vice President Harris is saying the same thing," raising the question, "Who will pay for all these costs?"
Former President Trump also unveiled a pledge to completely eliminate taxes on Social Security (old-age pension). Currently, tax relief benefits are provided only to low-income seniors. This is aimed at targeting elderly voters. In the 2020 presidential election, Trump led President Biden by 5 percentage points among voters aged 65 and older. However, recent polls by The New York Times (NYT) and Siena College show a tight race between former President Trump and Vice President Harris in support among voters aged 65 and older.
However, implementing this pledge would require $1.8 trillion (approximately 2,449 trillion won) in funding. Bloomberg expressed concerns that it could ultimately jeopardize the Social Security trust fund itself.
Bloomberg pointed out, "None of the pledges consider how the burden from tax cuts will be passed on," noting that it will be shifted "from elderly taxpayers to younger taxpayers, from parents to those without children to support, and from tip-receiving workers to salaried workers."
Critics argue that these are merely populist pledges aimed at winning votes without any concrete funding plans, especially as the U.S. national debt has already reached an all-time high. The U.S. Treasury Department announced in its daily statement of the national balance sheet on the 29th of last month that total debt exceeded $35 trillion (approximately 4,761.8 quadrillion won). The Congressional Budget Office projects that the U.S. national debt will surpass $56 trillion (approximately 7,618.8 quadrillion won) by 2034.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
