Taxes, Tariffs and the Federal Budget

The federal government expects to collect 5.6 trillion dollars in 2026, 17.5 percent of economic output, and to spend 1.9 trillion more than that, a deficit of 5.8 percent. Debt held by the public passes 101 percent of annual output in 2026 and keeps climbing under current law. Two changes since 2025 pull the revenue side in opposite directions. The 2025 reconciliation law made the 2017 rate structure permanent and added temporary deductions for tipped and overtime income, which the tax committee scores at 32.8 billion dollars in 2026 for the overtime deduction alone and 120.7 billion for both through 2029. Against that, tariffs went from a marginal revenue source to a significant one: the average effective rate rose from 2.3 percent in January 2025 to 7.1 percent by June 2026. That revenue is unusually unstable. The Supreme Court struck down the emergency-powers tariffs in February 2026, about 100 billion dollars had been certified for refund by July, and the replacement regime has already moved through three separate statutes in five months. On the household side, 19 million children live in families whose income is too low to receive the full child tax credit.

• Very likely better · 100 %

  Effect very large (+670)
  Lifting The Payroll Cap

  Charge the Social Security payroll tax on earnings above the taxable maximum of 184,500 dollars, which today stop being taxed altogether.

  Social Security Bipartisan proposal to apply the payroll tax above the taxable maximum
• Very likely better · 100 %

  Effect very large (+110)
  A Fully Refundable Credit

  Pay the full child tax credit to every eligible child, including those whose parents earn too little to owe income tax.

  Family taxation Long-standing proposal, closest to the 2021 expansion
• Very likely better · 100 %

  Effect large (+16)
  California Billionaire Tax

  Charge everyone who lived in California on 1 January 2026 with a net worth above 1 billion dollars a one-time tax of 5 percent, and spend nine tenths of it on health care.

  California (state) Citizens' initiative, qualified for the ballot on 17 June 2026
• Unclear · 48 %

  Effect medium (+2)
  School Scholarship Credit

  Let every taxpayer send up to 1,700 dollars of federal income tax to scholarship organizations for school children instead of the Treasury, from January 2027.

  Education tax credits Section 25F of the Internal Revenue Code, enacted in the One Big Beautiful Bill Act (2025); Treasury and IRS temporary and proposed regulations of October 2026
• Very likely worse · 0 %

  Effect large (−26)
  Keep the Tips Deduction

  Make the deductions for tipped and overtime income permanent instead of letting them lapse after 2028.

  Income tax Extension of the 2025 reconciliation law's temporary deductions
• Very likely worse · 0 %

  Effect very large (−150)
  The Forced-Labour Tariffs

  An additional duty of 10 or 12.5 percent on imports from sixty economies, set by whether each bans, or has committed to ban, imports made with forced labour.

  Tariffs Final action in sixty Section 301 investigations, July 2026