Trump, the Sequel—Should We Be Afraid? |
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Trump, the Sequel—Should We Be Afraid?

Trump’s second term would likely triple down on his first term’s trends: tax cuts for the rich and attacks on the Affordable Care Act.

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In the “Resolution Regarding the Republican Party Platform adopted by the Republican National Committee this summer, two clauses stick out: “the Republican Party has and will continue to enthusiastically support the President’s America-first agenda [and] the 2020 Republican National Convention will adjourn without adopting a new platform until the 2024 Republican National Convention.”

The RNC’s decision to forgo the platform process renewed claims, also made four years ago, that the Republican Party has become a “cult of personality,” more loyal to its current standard-bearer than to any set of ideas or guiding principles. Still, if Trump has managed to break down nearly all opposition within the GOP over the last half-decade, he has largely governed as conservatives would want him to. There’s no reason to suspect that he would go in a radically different direction if he were to win a second term.
 


A likely top priority for a second Trump term could be making the 2017 tax cuts permanent. But would the administration
want to go further than that?


 
Going into the last week of October, former Vice President Joe Biden holds a strong polling advantage in the presidential election against Trump. Trump may well lose the election or face hard limits on what he can accomplish with a Democratic Congress even if he wins. But the polls could also be wrong, as they’ve been before, and Trump triumphant could continue pursuing his agenda, such as it is. So what would four more years of a Trump administration mean for the U.S. economy and income inequality?

If Trump wins in November, his second term would likely double or triple down on many of the trends that held sway in his first term — like tax cuts that favor high-income people, deregulation that benefits corporations  and existential threats to the Affordable Care Act. Prior to the COVID-19 pandemic, the U.S. economy continued the expansion that began under the Obama administration. But under Trump income inequality continued to increase too, reaching its starkest level in half a century last year, as Politico reported. Depending on the makeup of Congress, a second term could have grave implications for economic growth and inequality.

Before the pandemic, the Trump administration’s biggest legislative accomplishment was the Tax Cuts and Jobs Act of 2017. The provisions in that bill lowered the tax burden on about two thirds of taxpayers, raised the burden for about 5% of taxpayers, and kept it roughly the same for everyone else, says Mark Mazur, the Robert C. Pozen director of the Urban-Brookings Tax Policy Center. The act’s largest benefits have gone to the highest income people and to corporations, Mazur says.
 


Experts describe a repeal of Obamacare as “a massive transfer of resources from low and middle income households to the wealthy,” and “devastating for children and families.”


 
The Tax Policy Center has also found that the act contributed to some short term growth in economic output, as “most households have more after-tax income, which they are likely to spend,” according to an analysis. But it has contributed to growing inequality, too. A report from the Economic Policy Institute last year concluded that the act “did not increase wages for working people, failed to spur business investments, decreased corporate tax revenues, and boosted stock buybacks in its wake.”

A likely top priority for a second Trump term, say Mazur and others, would be making the 2017 tax cuts permanent. But the administration may want to go further than that.

“The thing that they’ve been itching to do that was not included in the 2017 bill is cut capital gains taxes,” says Seth Hanlon, a senior fellow at the left-leaning Center for American Progress.

The capital gains tax is levied on profits from the sale of assets like stocks or land. Both Trump and Larry Kudlow, director of the National Economic Council, have said they want to lower the top capital gains tax rate from 20% to 15%, Hanlon notes. To do so would be a “cosmically regressive” move, he adds, as “virtually all” of the benefit of such a cut would flow to the wealthiest taxpayers, who stand to gain the most from maximizing profit by selling assets.

Conservative economists disagree about the impact of a capital gains tax cut. Adam Michel, a senior policy analyst at the Heritage Foundation, says it would “broadly encourage innovation and entrepreneurship through new business startups, because people know that the returns on taking that risk won’t be penalized on a second layer of taxation.” Michel agrees that along with making the 2017 cuts permanent, it would be a likely priority for a second Trump term.

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Trump has dropped other hints about how he would like to change the tax code, including lowering the corporate tax rate again and eliminating the payroll tax. In August, Trump signed an executive order waiving payroll-tax liabilities, but as the New York Times reported, most businesses chose not to take advantage of the waiver. The payroll tax funds programs like Social Security. Mark Mazur, of the Tax Policy Center, says that there are “parts of the conservative pundit class” who would like to see Social Security and other safety-net programs defunded and then privatized or eliminated, but that he doesn’t think it’s likely Trump would put much effort behind that.

On his own website, Trump says he would “Protect Social Security and Medicare,” which would be undercut by changes to the payroll tax. Michel, who supports extending the 2017 tax cuts and further cuts to the capital gains tax, says lowering the payroll tax shouldn’t be a priority.
 


Cutting the top capital gains tax rate would be “cosmically regressive,” says the Center for American Progress’ Seth Hanlon.


 
“Cutting the payroll tax is incredibly expensive from a budgetary perspective, and you don’t get a whole lot of economic bang for your buck,” he says. “We’ve tried temporary payroll-tax holidays in the past and they don’t change long-run incentives. Ultimately you end up with higher debt and then taxes have to go up in the future.”

Even if Trump 2.0 doesn’t pass more tax cuts through Congress, other potential moves could have similar impacts. The Supreme Court, more conservative than it was four years ago because of Trump’s appointments, will consider a challenge to the Affordable Care Act shortly after the election. If its decision results in the law being overturned, that would also mean the end of a 3.8% Net Investment Income Tax, which applies to capital gains and other investment income, that was adopted as part of the passage of the ACA.

“ACA repeal is a massive transfer of resources from low and middle income  households to the wealthy,” Hanlon says. “The ACA was a major inequality decreasing accomplishment — obviously not enough.”

That’s not to mention the potential health consequences of a decision that overturns the Affordable Care Act. Taryn Morrissey, an associate professor in the Department of Public Administration and Policy at American University, who worked on the ACA with former Sens. Ted Kennedy and Tom Harkin, says overturning the law would be “devastating for children and families.”

“The ACA protects everyone with pre-existing conditions from being excluded from a health insurance plan,” Morrissey says. “It used to be the Wild West, and insurance companies could just rescind policies when somebody got sick or could carve out pre-existing conditions.”

Those protections go beyond health to issues of childhood development, which can affect lifelong economic outcomes, says Morrissey, who is co-author of the book Cradle to Kindergarten: A New Plan to Combat Inequality. Some of Trump’s other budgetary proposals, like major cuts to SNAP benefits, could also disproportionately affect parents, Morrissey says, further putting low income children at a lasting disadvantage.

Meanwhile, the COVID-19 pandemic has had unequal impacts in terms of health effects, deaths and economic consequences. On his website, Trump promises to have a vaccine developed by the end of the year and “Return to Normal in 2021.” But experts say there’s not much reason to believe that a second Trump administration would handle the pandemic differently than it has during the last year, when the United States has tallied some of the worst numbers in the world for COVID-19 cases and deaths.

Rhea Boyd, a pediatrician and public health scholar in the San Francisco Bay Area, says the pandemic’s toll in the U.S. is the result of “a failed, and sometimes completely absent, federal response.” A second Trump administration would likely be more of the same, she says: undermining public-health advice and underfunding health infrastructure, with lopsided consequences for communities that are already at a disadvantage.

“This administration turned a crisis into a devastating tragedy,” Boyd says.


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