With the US economy slowing down the impact of the trade war, President Donald Trump is implementing another basic pre -election announcement, a tax bill that will affect the course of the US economy and that of the world economy.
In the shadow of confrontation with other countries over the increases of duties, which is dominated by the media, another controversy in the US is evolving, focusing on the tax exemptions and cuts in public spending. The ‘Great, nice bill’as the US president called it, which has more than a thousand pages, will decisive in the coming years the course of the budget deficit and debt of the US, for which they have already hit “bells” by ratings and markets.
The US government’s top bill Approved last month by the House of Representatives, with just one vote differencebut his vote by the Senate is pending, where the process is traditionally more difficult. Although the Republican Party also has the majority in this legislative (with 53 senators against 47 Democrats), there are objections Several members of the provisions of the bill and there are expected compromises for its vote.
The climate was also loaded by Elon Musk’s public opposition to the bill, which described as a “disgusting abomination”, stressing that it would further increase the budget deficit in 2 trillion. dollars last year and the public debt that exceeded 36 trillion. dollars.
Musk was until May head of the Ministry of Government Efficiency (Doge). He was ordered, by Trump, the task of reducing the public spending of the federal budget, abolishing entire public services and shrinking others by reducing the number of employees, which cost him and his businesses.
The richest man in the world had expressed the position of fiscal situation in the US prior to the 2024 elections that it is uncontrollable and that it is necessary to reduce budget deficits. According to US newspaper reports, several Republican senators have the same position, who want to trim tax exemptions and increase the costs of the Trump’s basic bill.
Trump is said to be open to changes that will not alter his basic pre -election announcement of a favorable tax environment for businesses and citizens who will support the growth of the American economy. What he has requested is to vote on the bill by July 4, as it has even included a provision to increase the permitted public debt threshold.
With the current debt limit estimated that it will be overcome at some point by September, the US president wants to end quickly with this pending.
Oil in the “fire” that has lit up the tax bill was dropped by the Congressional Budget Office (CBO), which estimates that in its latest version, as voted by the House of Representatives, it will reduce public revenue by about 3.7 trits. The next 10 years, while on the other hand, savings from spending cuts and increases in other revenue will amount to 1.2 trillion. dollars, leading to an increase in deficit by about $ 3 trillion. dollars (taking into account the increase in interest costs).
The White House does not accept CBO estimates because, he says, it does not calculate the additional income from the greatest growth of tax reduction. This calculation is expected to be made with a new assessment of the Congress’s office.
In addition, the US government stresses that the CBO calculates the expansion of tax relief – which have been in force since 2017 and expire at the end of 2025 – as additional reductions, while it is not. Indeed, much of the “new” tax reliefs are expanding those in force and relate to low tax rates for businesses and natural persons as well as specific incentives for investment, such as 100% of investment equipment and immediate deduction from investment profits for research and growth.
Beyond that, however The bill also provides for additional tax exemptions, such as an increase of $ 10,000 to $ 40,000 in the deduction of taxes paid at elementary or state level for those with an annual income of up to $ 500,000. The cost from this provision is very high – estimated at hundreds of two billions. dollars – and it is assumed that there will be adaptation to pass through the Senate. In addition, there are tax exemptions for tips, overtime and more.
“The bill will improve the deficit. It will help us deal with debt. It provides historical levels of mandatory savings. The fact that the CBO does not agree on is not particularly new, “said Trump’s Management and Budget Chief Budget. Indeed, Trump’s spokesman Caroline Levit claimed that the CBO had become “party and politicized”, despite the fact that their current director served in George Bush’s government.
In terms of public spending cuts, these are mainly about limiting criteria for integrating state medical care programs (Medicaid), with the CBO estimating that about 11 million Americans will lose this insurance, and the abolition of Green Economics. Act).
In any case, however, as analysts estimate, Debt in the US will not be restrained with the bill and is projected to continue to maintain a borrowing costs for the US State at a very high level – The yield on 10 -year bonds is steady for more than 4% – which has been upwardly affected by duties.