Former Trump ally Elon Musk has surprisingly turned against the president’s tax proposal, labeling it “debt slavery.” Trump’s tax legislation, according to a Yale University analysis, creates dramatic disparities – while the wealthiest 20% of Americans will receive an average of $6,055 annually, the poorest fifth will lose $560. The billionaire, who invested $290 million in Trump’s campaign, has now threatened Republican lawmakers with political retaliation and called for creating a new political party. The American economy faces uncertainty as the Senate continues voting on the controversial bill that will increase the budget deficit by a record $3.3 trillion.
Musk vs Trump: Sharp Criticism from Former Ally
Billionaire Elon Musk, in a series of posts on social media platform X, sharply criticized Republican lawmakers who voted for Trump’s tax package. The criticism is particularly surprising given that Musk was previously a strong Republican supporter. He described the current American system as a “one-party country – PORKY PIG PARTY!” and called for creating a new political party that “actually cares about the people.”
Musk’s main objections to the tax reform focus on:
- Record increase in the debt ceiling by five trillion dollars
- Contradiction between campaign promises to reduce spending and actual voting behavior
- “Insane spending” contained in the American fiscal policy proposal
Musk specifically threatened members of the Freedom Caucus, a conservative faction known for fiscal responsibility demands: “How can you call yourself the Freedom Caucus if you vote for a debt slavery bill with the biggest debt ceiling increase in history?”
Tax Inequality: Dramatic Differences by Income Groups
Analysis by economists from Yale University’s Budget Lab reveals uneven impacts of Trump’s tax legislation on different social strata of the American economy:
Annual income changes by groups:
- Poorest 20%: loss of $560
- Lower 20%: minimal impact
- Middle 20%: slight increase
- Upper 20%: significant rise
- Wealthiest 20%: average bonus of $6,055
The uneven distribution stems from a combination of tax breaks for the wealthy and cuts to social programs. The poorest layers will be most affected by limitations to Medicaid and SNAP food assistance programs, while higher income groups benefit from tax deductions and expanded local tax credits.
Trump’s Controversial 68% Tax Warning Under Scrutiny
President Trump repeatedly warns of a 68% tax increase if his tax bill fails to pass. However, the nonpartisan portal FactCheck.org points out that this figure likely refers to the percentage of Americans who will experience tax increases, not the actual magnitude of the rise.
The Urban-Brookings Tax Policy Center, a nonpartisan think tank, estimates real tax increases at only approximately 7.5% if the 2017 tax breaks were not extended. However, Trump has provided little information about the accuracy or reasoning behind his 68% figure regarding American tax reform.
Republican Fiscal Conservatives in Dilemma
Republican senators face a dilemma between supporting the presidential agenda and fiscal responsibility. Nonpartisan analysis showed that Trump’s tax bill in its current form will increase American national debt by $3.3 trillion at a time when debt already reaches a record $36 trillion.
Musk promises political retaliation against every Republican lawmaker who voted for the “biggest debt increase in history” after campaigning on reducing government spending. “They will lose their primaries next year if it’s the last thing I do on this Earth,” the billionaire wrote.
Impact on American Financial Markets and Investors
Uncertainty surrounding the controversial tax legislation is already affecting American bond markets. Investors are expressing growing concerns about the fiscal impacts of the proposal, leading to decreased attractiveness of U.S. Treasury bonds for domestic and foreign investors.
Moody’s agency already downgraded the U.S. credit rating in May, partly due to concerns about the growing budget deficit. The bill’s passage through Congress is thus creating tension in financial markets at a time when the country’s fiscal health is under analysts’ close scrutiny.
