The GOP Senate has proposed a budget plan that supports President Trump’s tax cuts, border security, spending cuts, and other agendas. The budget package includes the House-passed $4.5 trillion Trump tax plan, and it also increases the nation’s debt limit by $5 trillion.
President Trump supports the Senate proposal, which they will attempt to pass by the end of this week. If the GOP’s budget plan receives approval, it would align with Trump’s tax plan and agenda. The tax plan includes the extension of the TCJA 2017, a reduction in tax rates, the elimination of taxes on Social Security benefits, and other measures.
On Wednesday, Trump also introduced massive tariff plans to make Americans wealthy again. The House budget resolution would impact the economy, trade, and other areas that would eventually impact Americans. Americans are wondering about the current tax plan, tariff, and other can learn everything in the article below.
| Trump Tax Plan | $4.5 trillion tax cut |
| Spending Limit Over a decade | $1.7 trillion |
| Tax Plan Key Highlights | TCJA 2017 Highlights Social Security Act Taxes EliminationTax elimination on tips, and overtime payReduce corporate taxes |
| Revenue Loss Estimation | 16% ($710 billion) |
| New Tariffs | 10% on all countries on US imports Reciprocal tariff based on the country’s foreign trade policies |
| 10% tariff effective date | 05 April 2025 |
| Reciprocal tariff | 09 April 2025 |
Tax Plan
The House passed the Trump Budget resolution on 25 February 2025, which would reshape the federal government budget as it addresses the tax policies, energy, etc. Here are the key highlights of the Trump Tax plan for the fiscal year 2025:
- The administration extends the Tax Cuts and Jobs Act of 2017, which would reduce tax revenue by $4.5 trillion by 2034. The plan also offers $2 trillion in cuts in spending to boost the nation’s economy.
- The Long-run GDP will be boosted to 1.1%, offsetting $710 billion or 16% of the revenue loss. According to the government, the GNP (American income measures) will increase by 0.4%.
- With the TCJA 2017 extension, the government also includes no tax policy on overtime pay, tips, and Social Security benefits for retirees that they had promised earlier during their campaign.
- The plan also offers a deduction for auto loan interest for cars made in America, and also introduced higher tariffs on US imports.
- The plan allocated $300 billion for defence and border security to strengthen the nation’s security.
- According to the budget resolution, the House allows a $4.5 trillion deficit, if the spending is cut to $1.7 trillion, and if the spending is not cut by $1.7 trillion, the tax cuts cap will get diminished dollar-for-dollar and if the spending cut is more than $1.7 trillion, the tax cuts cap would also increase.
What’s happening?
The Senate approved the Budget resolution and started the reconciliation process, which specifies the tax cuts and spending for the decade. The budget reconciliation is the same process that Republicans used to pass the TCJA in 2017 and the Democrats used for the American Rescue Plan Act in 2021.
The Budget reconciliation process fast-tracks the tax enactment, spending, and changes introduced in the budget resolution. It allows these changes to be approved in the Senate without needing 60 votes, which is usually required to prevent a delay. The process would allow the Republicans to rely on the party-line vote to pass the bill.
As we mentioned, the GOP has pushed the $4.5 trillion tax cuts and made it dependent on the spending cuts. However, the Social Security and Medicare cuts are excluded from this, the analysts believe this will increase the federal deficit. Recently, President Trump has introduced the new tariff plan as promised in the budget resolution that would bring many changes to trade policies.
Trump New tariffs
President Trump has promised to impose new heavy tariffs on US imports to rebuild the economy, support American workers, and restore the national economy. On 02 April 2025, the President introduced the following new tariffs:
- The new tariffs follow two types: one where a 10% import tax is imposed on all goods entering the US, and the other is reciprocal tariffs, which target 60 nations based on their foreign trade.
- President Trump uses his IEEPA authority, and the 10% tariff on all countries will be effective from 05 April 2025.
- The reciprocal tariff will match the trade policies of the country on the US export, for instance, China charges 67% on US exports, so China will face a 34% tariff, while Japan and the European Union will face 24% and 20% tariffs, whereas 25% from South Korea. The reciprocal tariff will be effective from 09 April 2025.
- The new tariffs are also product-specific, such as Semiconductors, Steel, aluminum, Autos, copper, agricultural products, etc.
Impact
The Trump tax plans and new tariffs are facing both criticism and praise. Let’s see the potential impact of the new plan:
- The experts believed the tax cuts may help Americans save their income, but the concern is whether it will be enough to offset the revenue loss that would come with the tax cuts in a decade.
- The corporate tax reductions are facing criticism that the policy would help the high-income earners and may generate a gap in income inequality, which could affect the overall economy.
- The new policies may impact the income of Americans, as the tax cuts and exemptions would help to save more money.
- The new tariffs will bring changes to foreign trade policies and affect trade as nations may retaliate against the new tariffs; for instance, China, the EU, and Canada have imposed retaliatory tariffs.
- The price of products will increase with the new tariffs as it would affect more than $1.4 trillion of imports.
The Senate Republicans are now moving forward with the House-passed budget resolution, and they have already come up with a plan that resonates with Trump’s agenda. Let’s see what happens by the end of the week.