Introduction

In today’s American society, tax policy has always been one of the focus topics of public concern. From ordinary wage earners to large enterprises, everyone and economic entities are intricately linked to taxation. Any movement in tax policy can have far-reaching effects on economic development, social equity, and people’s lives. Among the many changes in tax policies in the past, the tax reform implemented during the Trump administration has attracted widespread attention, sparking extensive discussions and controversies. So, what adjustments did Trump make to the U.S. tax system? What ideas and goals are behind these reform measures? What kind of impact have they had on American society and the economy? What impact will they have on the cryptocurrency industry? This article will provide a detailed narrative on this topic.

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Trump’s tax reform measures

In 2017, the Trump administration promoted the enactment of the Tax Cuts and Jobs Act. This legislation did not eliminate income tax but instead introduced a comprehensive reform of the U.S. federal income tax system. Regarding personal income tax, the act adjusted the tax rate structure, reducing the highest marginal tax rate from 39.6% to 37% while simplifying the tax brackets, optimizing them to a certain extent. The objective of these adjustments was to alleviate the tax burden on the middle class and high-income groups, thereby stimulating personal consumption and investment. For example, for some middle-income families, the reduction in tax rates meant an increase in disposable income, which they might use to purchase real estate, automobiles, or other high-value goods, thus driving growth in related industries.

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In terms of corporate income tax, the reform was even more significant. The corporate tax rate was drastically reduced from 35% to 21%, a measure aimed at enhancing the global competitiveness of U.S. businesses. The lower tax rate allowed domestic companies to retain more profits, enabling greater investment in research and development, expansion of production capacity, and employee training. For example, Apple could potentially save a substantial amount of money on its U.S. operations due to the tax reduction. These savings could be used to establish new research and development centers within the country, attract top talent, and enhance the company’s capacity for innovation. Additionally, for some multinational corporations, the lower tax rate could encourage the repatriation of overseas profits to the U.S., leading to increased domestic investment and job creation.

Based on Trump’s past tax reform efforts, he has shown a greater inclination toward adjusting tax rates and optimizing the tax structure to drive economic growth rather than directly eliminating income tax. This is because income tax serves as a crucial source of fiscal revenue for the U.S. government, playing a key role in maintaining government operations and ensuring public services. If it were to be abolished, the government would face a significant fiscal shortfall, making it difficult to sustain normal public affairs and operations.

The goal of tax reform

Behind Trump’s implementation of these tax reform measures, there are clear ideas and goals. From the perspective of economic growth, he hopes to stimulate the vitality and creativity of enterprises by reducing tax rates, especially the corporate income tax rate, promote business expansion of investment and production, thereby driving overall economic growth. In terms of employment, Trump expects that with more profits and funds, enterprises can create more job opportunities. With more funds for expanding production scale, companies will inevitably need to recruit more employees.

In recent political activities, Trump has proposed several income tax reform plans, including exempting tips, Social Security benefits, and overtime pay from income tax. He has also suggested eliminating taxes for firefighters, police officers, military personnel, and veterans. To offset the resulting tax revenue loss, he proposed imposing higher import tariffs, planning to levy a universal 20% tariff on all imported goods from all countries. However, according to forecasts by CNBC, Trump’s proposed tariffs are expected to generate $3.8 trillion over ten years, whereas income tax revenue over the same period is projected to reach $33 trillion, resulting in a nearly $30 trillion fiscal shortfall. The Tax Foundation has also pointed out significant flaws in Trump’s approach of relying on import tariffs to offset tax cuts. Tariffs could provoke retaliation from foreign countries, and the combined impact of his proposed tariffs and retaliatory measures from trade partners would offset more than two-thirds of the long-term economic benefits of his tax cut proposals. Keith Gaddie, a political science professor at Texas Christian University, has also stated that tariffs are entirely insufficient as a revenue replacement and could lead to retaliatory tariffs, weakening U.S. domestic industries and their ability to profit from overseas sales. This suggests that, from the perspectives of fiscal revenue balance and international trade relations, the idea of abolishing income tax and replacing it with higher tariffs faces insurmountable practical challenges.

The impact of tax reform on cryptocurrency

At the individual investor level, the reduction of personal income tax rates in the Trump tax reform has increased the disposable income of some investors. Some investors interested in cryptocurrencies have more funds to invest in the cryptocurrency market. For example, moderate-income investors who were originally cautious about investing in cryptocurrencies due to limited funds may allocate some additional income to mainstream cryptocurrencies such as Bitcoin and Ethereum after the tax rate reduction, which to some extent increases the activity and capital inflow in the cryptocurrency market.

For cryptocurrency enterprises, the corporate income tax has been significantly reduced to 21%, which has a positive impact on cryptocurrency mining enterprises, blockchain technology research and development enterprises, etc. Taking cryptocurrency mining enterprises as an example, the lower tax rate allows enterprises to retain more profits, which can be used to purchase more advanced mining equipment and improve mining efficiency. Companies operating in the United States like Bitmain can use the saved funds to expand their mining scale, increase computing power, and consolidate their position in the global cryptocurrency mining sector. At the same time, blockchain technology research and development enterprises can invest more funds in technical research and development, attract more professional technical talents, and accelerate the application innovation of blockchain technology in the cryptocurrency field and other industries.

However, tax reform has also brought about some potential issues. With the increasing investment activity in the cryptocurrency market and the expansion of cryptocurrency enterprises, regulatory agencies have also increased their attention to the cryptocurrency industry. Due to the anonymity and cross-border nature of cryptocurrency transactions, regulation itself is difficult. After the expansion of the industry due to tax reform, regulatory agencies are concerned that cryptocurrencies may be used for tax evasion, money laundering, and other illegal activities, thereby strengthening regulatory efforts. For example, the Internal Revenue Service (IRS) in the United States has begun to more strictly examine the tax reporting of cryptocurrency transactions, requiring investors and enterprises to accurately report cryptocurrency transaction income, which has to some extent increased the compliance costs and operational pressure for cryptocurrency industry practitioners.

Controversies and Impacts of Tax Reform

Trump’s tax reform plan has sparked widespread controversy. Some critics believe that these reform measures largely favor the wealthy and large corporations, with relatively limited benefits for ordinary people. From the data perspective, although the individual income tax rate has been reduced, the actual tax reduction for some middle- and low-income families is not significant due to adjustments in the tax base and changes in some tax deduction items. For example, the provision that allows individuals to deduct state and local taxes from taxable income has been abolished, which may mean an increase in tax burden for residents living in high-tax states such as New York, New Jersey, and California, as they can no longer reduce their taxable amount through this deduction item.

In terms of finance, tax reform has led to a reduction in federal government revenue. According to the Congressional Budget Office (CBO), the Tax Cuts and Jobs Act is expected to reduce federal government tax revenue by about $1.46 trillion over the next decade. The decrease in revenue may put pressure on government expenditures such as public services and social security. The government may need to cut spending on some public projects or increase bond issuance to fill the fiscal gap. This could have adverse effects on vulnerable groups that rely on government services and also increase the burden of debt on the United States, posing potential risks to the long-term stability and development of the U.S. economy.

In addition, Trump’s own tax issues have also sparked much controversy. The New York Times once revealed that in the past 15 years, Trump did not pay any income tax for 10 years, and only paid $750 in taxes in 2016 and 2017. Although Trump refuted this as “fake news,” the report still raised public doubts about whether he, as president, sets a good example in tax payment. If the president is perceived to have tax issues, it may weaken the public’s trust in the fairness of the entire tax system and affect the willingness of the public to pay taxes lawfully.

Overall, although Trump has proposed some ideas for income tax cuts, the possibility of directly abolishing income tax is minimal, considering factors such as maintaining fiscal balance, ensuring government functions, and dealing with the complex international trade situation. During Trump’s presidency, although he did not end income tax, his tax reform measures have had complex and far-reaching impacts on the United States’ economy, society, and finances, and these impacts continue to generate discussions and controversies across various sectors even after he left office.