Trump’s Biggest Tax Lies

Lies can be dangerous, especially when propounded by the leader of the most powerful country in the world. Lies about tax policy can result in billionaire tax breaks while we get left behind.

By William Rice

Donald Trump has long since proved himself an inveterate liar—and tax policy has been a particular target of his gross exaggerations, heinous half-truths, destructive disinformation and flat-out falsehoods. As his Republican allies in Congress begin to pursue his second-term tax agenda, it’s an apt time to review some of Trump’s biggest tax lies.

 "My plan will massively cut taxes for workers and small businesses.” (Nov. 4, 2024)

Trump’s plan to permanently extend the expiring parts of his 2017 tax law will overwhelmingly benefit wealthy households and big corporations while costing $5.5 trillion, a price that working families will be forced to pay through reduced public services, greater household costs and higher interest rates. 

In the first year of a full extension of the law, the highest-income 1% of households—those with annual incomes of roughly $915,000 and up—will get an average tax cut of over $45,000. Middle-income families will on average get less than $3 a day.  

Trump’s promise to end federal income taxes on tips would only apply to about 5% of the low-income workforce, would often cost those workers money because they would no longer be eligible for working-family tax credits, give employers another excuse not to raise wages and be open to wide-scale abuse. 

Similarly, his vague plan to eliminate taxes on overtime would only apply to the 8% of hourly workers who regularly work overtime, do nothing for independent workers in the “gig” economy who don’t qualify for overtime pay, and again invite wide-scale abuse.  

His pledge to end taxes on Social Security benefits would give essentially nothing to the lowest-income 40% of Social Security recipients—whose benefits are already almost entirely exempt—while adding almost $1.5 trillion to national debt over 10 years, endangering the funding of public services Social Security recipients rely on, like healthcare, food assistance and public housing. 

The expiring part of the law that Trump and his allies call a “small business tax break” is actually a huge tax giveaway to big business. Last year over half the benefit from this pass-through loophole went to the households of business owners with incomes over a million dollars. 

“When we were a smart country, in the 1890s…this is when the country was relatively the richest it ever was. It had all tariffs. It didn’t have an income tax. Now we have income taxes, and we have people that are dying.” (Oct. 27, 2024)

In the 1890s, women were denied the right to vote (except in a handful of sparsely populated states); Black Americans were the constant victims of state-sanctioned discrimination, disempowerment and violence; one in five children between the ages of 10 and 15 were forced to work, often in dangerous jobs; about 15% of all adults were illiterate; and 80% of the population lived in poverty. 

In 1900, the U.S. economy produced goods and services worth around $600 billion (in inflation-adjusted dollars). In 2024, its gross domestic product was almost $30 trillion— or 50 times more. In 1960, when America’s top corporate tax rate was over 50%, the United States accounted for 40% of the world’s total economic output. The top U.S. corporate tax rate is now down to 21% and its share of the world’s economy has shrunk to only half as much. 

Tariffs were replaced with a federal income tax in the early 20th century because income taxes are fairer to working families. Even though they don’t pay a fair share of taxes compared to their share of national wealth and wealth growth, higher-income households pay most federal income taxes. In contrast, tariffs—which are taxes on imported goods paid by the importer—can wind up burdening working families because tariffs can be used by corporations as an excuse to increase consumer prices. To replace all the revenue now raised by income taxes would require an across-the-board 70% tariff on all imported goods, which would give corporations the green light to massively hike already inflated prices. 

And by the way: people also regularly died when the government was funded with tariffs. 

"Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens. For this purpose, we are establishing the External Revenue Service to collect all tariffs, duties and revenues. It will be massive amounts of money pouring into our treasury coming from foreign sources.” (Inaugural Address, Jan. 20, 2025)

In 2023 (the most recent year with complete data), the U.S. government spent 1.2% of its budget on foreign aid, meaning 98.8% of taxpayer-supplied revenue went to domestic purposes. 

There is already a federal agency that collects tariffs and duties called U.S. Customs and Border Protection (CPB). Under various names, it has existed since 1789. 

Tariffs are not paid by foreign countries but by the American companies importing the goods. So any money pouring into the Treasury as a result of tariffs will be coming from U.S. firms. 

Lies can be dangerous, especially when propounded by the leader of the most powerful country in the world. Lies about tax policy—if believed—can result in billionaires and huge corporations getting big tax cuts while working families lose vital public services and pay higher costs. Confronting and disproving those lies can, conversely, lead to a reformed tax system in which the rich and corporations finally pay closer to their fair share and we build an economy that works for everyone, not just those at the top. It’s up to us to decide which path we want to take.