Accounting
Trump tax cuts would cost more than almost all federal agencies
Republican nominee Donald Trump and running mate JD Vance are campaigning on a grab bag of tax cut proposals that could collectively cost as much as $10.5 trillion over a decade, a massive sum that would exceed the combined budgets of every domestic federal agency.
Even if Congress were to eliminate every dollar of non-defense discretionary spending — projected to be $9.8 trillion over the next 10 years — it still wouldn’t offset the estimated expense of the wide-ranging tax cuts Trump and Vance have floated in recent weeks.
The price tag is based on rough, initial estimates from tax and budget specialists because the Trump campaign hasn’t released detailed policy plans for its tax promises.
Emily Elconin/Bloomberg
The Trump campaign said in a statement the former president will cut wasteful spending and increase energy production to pay for the tax cuts and lower the national debt. The campaign didn’t offer more detail.
Though Democrat Kamala Harris also has proposed a few large tax cuts — she would exempt tips from taxation and expand the child tax credit — the impact on the nation’s finances pales in comparison. She calls for offsetting the lost income, which one think tank estimates at $2 trillion, with tax increases on corporations and wealthy individuals.
The sheer magnitude of the Trump campaign’s tax promises make it highly unlikely they all would pass even in a Congress controlled by Trump allies. The Republican ticket’s tax proposals include extending Trump’s 2017 tax cuts, a big expansion to the child tax credit and exemptions for tips and Social Security payments.
“Congress is not going to pass a $10 trillion deficit-financed tax cut,” said Kyle Pomerleau, a senior fellow with the right-leaning American Enterprise Institute.
Republicans have long argued that tax cuts boost growth. But it’s not clear how much Trump’s proposals, which largely cut levies for individuals rather than businesses, would spur new economic activity.
The combined cost of the Trump plans is so big that if Congress were to try to pass the tax cut proposals and keep spending flat, it means they could continue to fund the military, federal benefit programs, like Social Security, pay interest on the debt — and nothing else. That means eliminating major federal agencies that handle duties such as law enforcement, border security, air traffic control, tax collection and international relations.
Harris and President Joe Biden released a detailed budget proposal this year to cut federal deficits $3 trillion over a decade, by raising taxes on corporations and wealthy individuals and other measures. Those plans mirror some of the offsets Harris has proposed but previously have run into powerful opposition from major business lobbies.
Without those compensating tax increases, the Harris proposals could increase the deficit by as much as $2 trillion over the next decade, according to the University of Pennsylvania Penn Wharton Budget Model.
Trump’s supporters are accustomed to his impromptu, broad-stroke policy pronouncements, while key Democratic constituency groups demand detailed policy proposals and a firm plan offsetting the cost.
Harris is continuing to roll out policy ideas piecemeal. On Tuesday, she called for an
Tax agenda
For both candidates, much will hinge on how well their party does in congressional elections, said Wendy Edelberg, a former Federal Reserve and Congressional Budget Office economist who’s now director of the Brookings Institution’s Hamilton Project.
The outlook “depends on a million different factors, particularly the balance of power in Congress,” Edelberg said. “Perhaps no policy will get enacted as specifically proposed by either candidate.”
Taxes will be a top agenda item in Congress next year, regardless of who wins the White House or which party controls the House and Senate. Major portions of Trump’s 2017 tax cuts — including lower individual rates and deduction for small businesses — expire at the end of 2025, which will force Congress to address the tax code next year.
Trump has made extending his signature tax law the centerpiece of his agenda. The Congressional Budget Office says that would cost $4.6 trillion over ten years. He’s also floated lowering the corporate rate to 15% from 21%, adding another $874 billion to the total, according to a budget model by the Committee for a Responsible Federal Budget.
On the campaign trail, the Republican ticket has verbally floated more tax ideas with hefty price tags: excluding Social Security payments from taxes ($1.8 trillion), exempting taxes on tipped wages ($250 billion) and increasing the $2,000 child tax credit per child to $5,000 ($3 trillion).
Added all up, that’s $10.5 trillion. If Congress were to seriously consider these ideas, official federal scorekeepers would model out the effects, including how the tax cuts interact with one another.
Revenue raisers
Trump has offered very few options to raise more federal revenue. He’s vowed to block any cuts to Medicare and Social Security benefits and has called for an increase in military spending. He’s proposed universal tariffs ranging from 10-20%, which on the lowest end of the spectrum could bring in $2.8 trillion over ten years, according to the left-leaning Urban-Brookings Tax Policy Center.
That has the potential to cover some of the cost of his tax cuts, but doesn’t take into account what economists warn are large negative economic growth effects or the cost of compensating farmers for trade retaliation from other countries.
The rising national debt is already stoking concern among investors and ratings agencies.
Federal Reserve Chair Jerome Powell has warned that higher government budget deficits are on an unsustainable path. In November, Moody’s Investors Service signaled it could downgrade the U.S. from the highest investment grade, Aaa.
CBO projects federal debt held by the public will exceed 100% of the GDP next year and rise to 122% in ten years without any new tax cuts.
“The fiscally responsible thing for either candidate to do, if they are proposing tax cuts, is to tell us how they are going to pay for them,” said Keith Hall of George Mason University, who once led the nonpartisan CBO.
The Financial Accounting Standards Board issued a
U.S. GAAP currently doesn’t provide specific authoritative guidance about the recognition, measurement, and presentation of a grant received by a business entity from a government. Instead, many businesses currently apply the International Financial Reporting Standards Foundation’s International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance, by analogy, at least in part, to account for government grants.
In 2022 FASB issued an Invitation to Comment, Accounting for Government Grants by Business Entities—Potential Incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into GAAP. In response, most of FASB’s stakeholders supported leveraging the guidance in IAS 20 to develop accounting guidance for government grants in GAAP, believing it would reduce diversity in practice because entities would apply the guidance instead of analogizing to it or other guidance, thus narrowing the variability in accounting for government grants.
Patrick Dorsman/Financial Accounting Foundation
The proposed ASU would leverage the guidance in IAS 20 with targeted improvements to establish guidance on how to recognize, measure, and present a government grant including (1) a grant related to an asset and (2) a grant related to income. It also would require, consistent with current disclosure requirements, disclosure about the nature of the government grant received, the accounting policies used to account for the grant, and significant terms and conditions of the grant, among others.
FASB is asking for comments on the
“It will not be a cut and paste of IAS 20,” said FASB technical director Jackson Day during a session at Financial Executives International’s Current Financial Reporting Insights conference last week. “First of all, the scope is going to be a little bit different, probably a little bit more narrow. Second of all, the threshold of recognizing a government grant will be based on ‘probable,’ and ‘probable’ as we think of it in U.S. GAAP terms. We’re also going to do some work to make clarifications, etc. There is a little bit different thinking around the government grants for assets. There will be a deferred income approach or a cost accumulation approach that you can pick. And finally, there will be different disclosures because the disclosures will be based on what the board had previously issued, but it does leverage IAS 20. A few other things it does as far as reducing diversity. Most people analogized IAS 20. That was our anecdotal findings. But what does that mean? How exactly do they do that? This will set forth the specifics. It will also eliminate from the population those that were analogizing to ASC 450 or 958, because there were a few of those too. So it will go a long way in reducing diversity. It will also head down a model that will be generally internationally converged, which we still think about. We still collaborate with the staff [of the International Accounting Standards Board]. We don’t have any joint projects, but we still do our best when it makes sense to align on projects.”
PwC made a $1.5 million investment to Bryant University, in Smithfield, Rhode Island, to fund the launch of the PwC AI in Accounting Fellowship.
The experiential learning program allows undergraduate students to explore AI’s impact in accounting by way of engaging in research with faculty, corporate-sponsored projects and professional development that blends traditional accounting principles with AI-driven tools and platforms.
The first cohort of PwC AI in Accounting Fellows will be awarded to members of the Bryant Honors Program planning to study accounting. The fellowship funds can be applied to various educational resources, including conference fees, specialized data sheets, software and travel.
Krisztian Bocsi/Bloomberg
“Aligned with our Vision 2030 strategic plan and our commitment to experiential learning and academic excellence, the fellowship also builds upon PwC’s longstanding relationship with Bryant University,” Bryant University president Ross Gittell said in a statement. “This strong partnership supports institutional objectives and includes the annual PwC Accounting Careers Leadership Institute for rising high school seniors, the PwC Endowed Scholarship Fund, the PwC Book Fund, and the PwC Center for Diversity and Inclusion.”
Bob Calabro, a PwC US partner and 1988 Bryant University alumnus and trustee, helped lead the development of the program.
“We are excited to introduce students to the many opportunities available to them in the accounting field and to prepare them to make the most of those opportunities, This program further illustrates the strong relationship between PwC and Bryant University, where so many of our partners and staff began their career journey in accounting” Calabro said in a statement.
“Bryant’s Accounting faculty are excited to work with our PwC AI in Accounting Fellows to help them develop impactful research projects and create important experiential learning opportunities,” professor Daniel Ames, chair of Bryant’s accounting department, said in a statement. “This program provides an invaluable opportunity for students to apply AI concepts to real-world accounting, shaping their educational journey in significant ways.”
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