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Trump dangles so many tax breaks even some advisers are confused

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Donald Trump at a Town Hall event

Emily Elconin/Photographer: Emily Elconin/Bloo

Donald Trump’s ever-growing litany of tax proposals includes something for almost every American family: tipped workers, hourly employees, senior citizens — and now even the higher-income residents of Democratic-led states whose tax breaks he took away while president.

And he’s not done yet: Trump will make a speech on Tuesday in Georgia to outline his vision to use tax breaks and other incentives to bolster U.S. manufacturing.

The former president has thrown out such a wide range of tax proposals that even his own advisers are unsure about which ones he intends to enact if elected. Some of the pronouncements have come as surprises and caused angst among allies. 

Within Trump’s orbit, the former president’s menu of tax ideas is seen as a way to appeal to voters in an extremely tight election — particularly, low-and-middle-income Americans frustrated by high prices looking for financial relief.

“I see it as a way of Trump trying to figure out how he can win over more working-class Americans,” said Stephen Moore, a senior fellow at the Heritage Foundation and an informal economic adviser who briefs Trump every few months on the state of the economy. “Some of the ideas are good. Some of the ideas are not so good. On balance, most of the ideas are good.”

Not since President George H. W. Bush asked voters to read his lips has a president made such big promises on taxes in an election campaign. For Trump, as with Bush, the question is whether he can keep them. (Bush, despite his “no new taxes” pledge, increased levies.)

“Principles of sound tax policy, economics — that’s no longer in the driver’s seat. Politics is in the driver’s seat. That’s why we’re seeing carve-outs and things that sound good on the campaign trail,” said Erica York of the Tax Foundation, a right-of-center think tank.

If elected, Trump would go into negotiations with Congress regarding a wish list totaling $11 trillion and counting, according to the Tax Foundation. That includes the extension of the 2017 tax cuts, which will expire unless Congress acts. He has also pledged as much as $2.8 trillion in additional revenue from tariffs to offset a portion of that cost. The former president and his allies have said his tax-cut proposals would bolster economic growth, helping to offset some of the cost, though his campaign hasn’t provided any details.

The Trump campaign said he isn’t making empty promises. 

“President Trump delivered on his promise to cut taxes in his first term and he will deliver again in his second term,” said spokeswoman Karoline Leavitt.

Vice President Kamala Harris has also made tax policy a central part of her campaign, pledging to increase the Child Tax Credit, create incentives to first-time home-buyers and expand deductions for startup businesses. She even co-opted one of Trump’s signature ideas — no taxes on tips, giving the proposal bipartisan momentum. Harris is planning her own economic-focused address this week. 

The Tax Foundation found that Harris’ tax plan would decrease the deficit because the reductions are more than offset by higher levies on corporations and wealthy households.

Pinch of SALT

Trump has targeted his proposals at key election constituencies. When in Nevada, a state with the highest percentage of service and hospitality workers, he made a surprise proposal to end taxes on tips. He’s offered to eliminate taxes on Social Security, a boon to retirees. To woo blue-collar workers, he proposed ending taxes on overtime. 

And in his latest proposal, he reversed himself on one of the more controversial provisions of the Tax Cuts and Jobs Act, his signature tax rewrite of 2017. 

By capping the deduction of state and local taxes at $10,000, Trump helped to offset a higher standard deduction and lower overall rates in the 2017 bill. The SALT cap also had a political dimension: The taxpayers most affected are in districts with higher home values and higher tax rates — and are predominately run and represented by Democrats.

But the 2022 midterm elections helped sweep a number of Republicans into some of those districts, especially in New York State, where lawmakers have lobbied Trump to change course.  

“It disproportionately hurts states like New York,” said Rep. Michael Lawler, a Republican representing the Hudson Valley who said he raised the issue with Trump last month. “So, I’m heartened, obviously, to hear the former president say he will work with us to fix it.”

As for how the restored SALT deduction would be paid for, Lawler said: “Nobody knows.”

Moore said some of Trump’s economic advisers have discussed reviving SALT in a scaled-back fashion, allowing homeowners to deduct up to $15,000 or $20,000 annually, instead of the $10,000 permitted now.

One idea which Trump genuinely is wedded to, advisers say, is his proposal of no longer taxing tips. That idea has been under consideration since the primaries, his advisers say, but they held off on announcing it until the more competitive general election.

Tax base

How far Trump can go will depend on which party controls Congress next year, but his tax plan could face obstacles in both parties over concerns about costs and fairness.

Many of his proposed carve-outs go against the grain of four decades of tax policy, prompted by President Ronald Reagan who vowed to “broaden the base” by eliminating targeted tax breaks and lower rates for everyone.

Any move to exclude a certain type or source of income from taxes will undoubtedly change how people work. A no-tax-on-tips policy, for example, could prompt more workers to agree to lower wage in exchange for the promise of more tips. An hourly worker could rearrange his or her schedule to maximize overtime — and might even agree to a lower hourly rate to do so.

“Could some employers get creative? I suppose so. At the end of the day, to be honest, I’m more concerned about the incentives the other way,” said Rep. Russ Fulcher, an Idaho Republican who has a bill to eliminate taxes on overtime pay. “As exacerbated by Covid, we have these programs in place that encourage not working, and that’s a problem in itself.”

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Accounting

Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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