Incentivizing the Wrong Things
Of tax deductions, credits, and the 2024 election...
It’s pretty obvious that I’m no fan of Donald Trump. There is a plethora of reasons why, but I wanted to use this post to focus on his mangled prioritization and how it sets a poor vision for the future of the country.
Donald Trump.
He’s said numerous times that he may end the electric vehicle (EV) tax credits that are currently in place. For those not familiar, you can read the full writeup on the IRS’s site about what’s currently in place here. But the main gist is that if qualified, you can receive anywhere from ~$3,700 to $7,500 in tax credits for buying an eligible EV.
Trump’s reasons for ending the EV tax credits are much like most of what he says: lacking any meaningful substance. But the reason he gave for ending them (from Reuters) is at direct odds with his most recent tax deduction/credit plan. But here’s the reason he said he wants to get rid of the EV tax credits:
“Tax credits and tax incentives are not generally a very good thing” - Donald Trump
This is quite in direct odds with his most recent plan to appeal to the well off in America by promising to make automotive loan interest tax deductible. From CBS’s reporting, Trump said: “We're going to make it fully deductible, the interest payments, that's going to revolutionize your industry”.
On its face, this sounds like a good plan to help the automotive industry and potentially folks with high interest automotive loans. The existing mortgage interest tax deduction helps families get a kickback when it comes to tax time on the interest they paid on their mortgage payments. Trump’s plan would want to do the same thing with automotive payments.
But if we take his desire to cut taxes for the wealthy further, do little to do the same for average Americans, remove the EV tax credit, and further help prop up the gasoline industry, we see that his automotive loan plan aims to do little to expand mass transit in America or clean energy in America. It, of course, would set America back years.
There are, of course, ways to implement an automotive interest deduction that helps non-wealthy Americans and promotes clean energy:
Keep the EV tax credit
Put a cap on income for Americans looking to claim the automotive interest deduction
Put a cap on eligible vehicle cost
Make mass transit a tax deduction or credit
Now, there’s still a big, glaring problem with Trump’s plan just on the surface. And it’s entirely because of the fact that whomever that would want to get this deduction would need to itemize it. And the interesting thing here, Trump’s tax cut for the wealthy caused a dramatic drop off in folks that itemized deductions instead opting for the standard deduction. How much of a drop off? Prior, roughly 30% itemized their deductions. That number now stands at a little bit over 10% (~11.5%). And of those folks that itemized, the overwhelming majority of them are tax filers with higher incomes.
So, what does that mean? Trump’s automotive interest tax deduction would overwhelmingly target high income households. Once again giving back to the well off and doing virtually little to others. A hallmark of Trump’s candidacy and presidency…and just who he is as a person. Somebody that has never, ever looked out for the little guy or gal.
Republicans used to want to balance the budget. But Trump additionally wants to cut taxes for the wealthy, yet again! Trump’s recent proposals (automotive loan interest deduction, not taxing tips, etc.) would increase the deficit by nearly $7 trillion over the next decade. If you compare that to Harris, hers would only increase the deficit by around a trillion. That’s a dramatic difference.
The thing about Trump is that he severely lacks any real strategy outside of throwing red meat to a very particular demographic of Americans. And the interesting thing about these folks is when they ultimately never get even a smattering of the execution, they willfully ask for more of that red meat not realizing it was never real red meat to begin with.
It was just the echo from their chamber fueling their anger.
So, I ask you to take a step back. If a coherent strategy isn’t talked about, you can usually assess what somebody is trying to accomplish by looking at the details, the narrative they’re putting together, the priorities they place. And to me, the lack of a coherent vision on how to make America and Americans better deeply disgusts me about Trump.
I’m not trying to make this Kamala vs. Trump. I’m strictly using the lens of what you incentivize is what you prioritize. And the priorities are all wrong here. Fossil fuels, tax cuts for the most well off, increasing costs on the little guy/gal, hyper-accelerating trade wars via tariffs that will explode costs for your family and mine…it’s all unforgivable. And preventable.
Be careful about what box you tap/fill in on Tuesday. Ask yourself the following: why does Elon Musk, the richest man in the world, truly support Donald Trump? The answer will be abundantly clear. And it’s not because he’s the right choice for America.
It’s because he’s only the right choice for people like Elon.