In a recent campaign speech, former President Donald Trump pledged to abolish taxes on overtime pay if re-elected. Speaking in Tucson, Arizona, Trump argued that this move would incentivize workers and ease hiring pressures on businesses. He emphasized that professions like nurses, truck drivers, and factory workers deserve relief, framing the proposal as a benefit for “hardworking citizens.”
This proposal aligns with Trump’s broader campaign for large tax cuts, including extending 2017’s income tax reductions, eliminating taxes on service tips, and lowering corporate taxes. However, he did not explain how these cuts would be funded, despite the U.S. national debt reaching $35 trillion.
Trump’s rival, Vice President Kamala Harris, has proposed alternative tax reforms targeting working and middle-class Americans, including credits for homebuyers and small businesses, while advocating for increased taxes on wealthier individuals and corporations. The Harris campaign accused Trump of making unsustainable promises and criticized his tax policies as favoring the wealthy.
This situation highlights key economic concepts such as taxation policy, fiscal responsibility, and the impact of tax cuts on government revenue and public services. Trump’s promise brings up debates about tax incentives for labour versus the long-term consequences for the national budget. It also illustrates the competing approaches to taxation between Republicans and Democrats, and the broader role of fiscal policy in an economy.
THINK LIKE AN ECONOMIST!
Q1. Define the term “tax incentive.”
Q2. Explain how Trump’s proposal to eliminate overtime taxes could affect workers and businesses.
Q3. Analyse the potential economic impact of cutting taxes while the national debt increases.
Q4. Discuss whether cutting taxation is the most effective method for reducing inequality.
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