IMF Warns Trump’s New Tax Bill Could Add $4 Trillion to U.S. Deficit, Deepen Inequality

The International Monetary Fund (IMF) has issued a strong warning about former President Donald Trump’s proposed tax legislation. The fund calls it a serious fiscal threat that could increase the U.S. deficit by $4 trillion over the next decade. 

The bill, which extends Trump’s 2017 tax cuts and introduces new exemptions, includes tax-free tips and overtime pay. It faces criticism for going well beyond any proposed spending cuts. The IMF estimates it would add $3.4 trillion to the deficit, even before considering interest costs. 

“This plan goes against the urgent need for debt reduction,” said IMF spokesperson Julie Kozack. U.S. debt has climbed from 73% of GDP in 2013 to nearly 98% today. 

Join PSU Connect on WhatsApp now for quick updates! Whatsapp Channel

Trump allies argue that the tax cuts will encourage enough economic growth to compensate for the deficits. They project 3% GDP growth driven by increased tax revenue and tariffs. However, most economists strongly disagree. 

Six Nobel Prize-winning economists have criticized the bill as “shocking.” They argue it mainly benefits the wealthy while placing more pressure on low-income families. 

According to the nonpartisan Congressional Budget Office, the poorest American households could see their resources drop by 4% by 2033. Harvard economist Kenneth Rogoff noted that similar tax cuts in the past “led to large deficits, not sustainable growth.” 

The IMF’s criticism comes just as Moody’s downgraded the U.S.’s final AAA credit rating due to growing debt. The fund also lowered its U.S. growth forecast for 2025 to 1.8%, blaming the uncertainty from unpredictable policy changes. 

One particularly controversial feature, Section 899, would let the U.S. Treasury impose a 20% tax on foreign investors from countries seen as having "unfair" tax systems. Experts warn this could upset global markets and lead to retaliatory actions. 

Despite these rising concerns, Treasury Secretary Scott Bessent has dismissed the criticism. He claims that traditional economic forecasts are “lagging indicators” that do not reflect the bill’s long-term effects. The legislation is expected to go to the Senate for a vote in the coming weeks.