Trump Floats Tax Break for Carmakers Hurt by His Own Trade Deal
Former President Donald Trump has proposed a number of potential tax breaks to be enacted if voters give him a win in November. This week, he added a protectionist wrinkle to one of his proposals for his second term—which would be difficult to abide by, because of policies he enacted during his first term.
As Reason reported earlier this month, Trump told the Detroit Economic Club that if elected in November, “we will make interest on car loans fully [tax] deductible.”
“When we do all of this, you will witness nothing less than the launch of a new American industrial revolution,” he added. “By the end of my term, the entire world will be talking about the Michigan miracle and the stunning rebirth of Detroit.”
This week, Trump added another wrinkle to the plan. “I just made a decision to do it a little bit differently, because I’m only gonna do it if they build that particular product—namely, an automobile—in the United States,” he told a crowd in North Carolina on Tuesday.
“Deductibility of interest is great, but only if the car is manufactured in the United States,” he added, according to Bloomberg. “Why the hell would we give them taxes if they manufacture the car in China, Japan or lots of other places that stole our business over the years?”
But Trump’s plan was already economically illiterate, and this tweak only makes that worse. Deducting auto loan interest would require itemizing one’s deductions, and 90 percent of taxpayers just take the standard deduction. For tax year 2024, the standard deduction is $29,200 for married couples and $14,600 for individuals; anyone hoping to deduct auto loan interest would need to have more than that amount in other eligible expenses, like mortgage interest or real estate taxes. (Congress could also carve out an exception that could be deducted in addition to the standard deduction, a category that currently includes alimony and student loan payments.)
By further limiting the deduction only to American-made cars, Trump is narrowing the number of people who could even qualify, especially since the trade policies he enacted during his first term have already made it more difficult to build cars in America in the first place.
Trump won the presidency in 2016 promising to kill existing trade deals, chiefly the 1994 North American Free Trade Agreement (NAFTA), and replace them with something better. In the end, the United States–Mexico–Canada Agreement (USMCA) was that replacement, which he signed into law in 2020.
The USMCA was largely just a rehash of NAFTA, but
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