The 'Three-Legged Stool' Economic Philosophy of the Trump Administration (Part 2) | In-depth Analysis of Tax Cuts and Deregulation

- 8월 22, 2025

[Economic Analysis] The 'Three-Legged Stool' Economic Philosophy of the Trump Administration (Part 2) | In-depth Analysis of Tax Cuts and Deregulation

[Economic Analysis] The 'Three-Legged Stool' Economic Philosophy of the Trump Administration

The 'Three-Legged Stool', a metaphorical representation of the Trump administration's economic policy, symbolizes his core national agendas: Tariffs, Tax Cuts, and Deregulation. In this three-part series, we will conduct an in-depth analysis of the second and third legs, the tax cut policy and deregulation, and explore their economic effects and limitations from various angles.

The 'Three-Legged Stool' Economic Philosophy of the Trump Administration (Part 2)

The second and third legs supporting the Trump administration's economic philosophy are Tax Cuts and Deregulation. These policies were pursued with the stated goal of promoting 'private-sector-led growth.' While the tariff policy aimed to raise external barriers, tax cuts and deregulation focused on revitalizing internal economic activity. In this article, we will conduct an in-depth analysis of the specific contents of these two key policies and their underlying fiscal and social implications.

An infographic showing tax reductions and deregulation

4. The Second Leg: Bold Tax Cut Policy

The Trump administration's tax cut policy is centered on the Tax Cuts and Jobs Act (TCJA) passed in 2017. While this bill was set to expire at the end of 2025, there are analyses that it is likely to be extended under a second Trump administration.

4.1. Key Contents and Goals of the Tax Cut Policy

The core of the TCJA was the reduction of the corporate tax rate. The top rate was significantly lowered from the previous 35% to 21%, and efforts were made to revitalize U.S. manufacturing by lowering the corporate tax rate for manufacturing to 15%. Additionally, tax cuts were implemented across various tax categories, including a reduction in individual income tax rates, an increase in the deduction limit for state and local taxes (SALT), and an expansion of the estate tax exemption to reduce the burden on high-net-worth individuals.

Tax Category	Changes	Detailed Description
Corporate Tax	Top rate 35% → 21%	Proposed to lower manufacturing corporate tax rate to 15%
Individual Income Tax	Top rate 39% → 37%	Tax rate reduction for most income brackets
State and Local Tax (SALT)	Deduction limit $10,000	Disadvantageous for high-income earners residing in high-tax states
Estate Tax	Exemption limit $5.49 million → $13.6 million	Reduction of estate tax burden for high-net-worth individuals
Corporate Investment	Abolition of net operating loss carryover, etc.	Abolition of some tax deduction clauses in the name of stimulating corporate investment
Real Estate Investment	Bonus depreciation benefits	Increased expectation of immediate depreciation for real estate investment

4.2. Impact and Fiscal Implications of the Tax Cut Policy

While the tax cut policy was advertised as benefiting all classes, it has been criticized for actually deepening wealth inequality. According to research, the increase in after-tax income was concentrated among the wealthiest classes. Although corporate tax cuts led to an 11% increase in corporate investment, the trickle-down effect, where this investment would lead to broader economic growth or a rise in median wages, was limited.

Furthermore, the tax cut policy became a factor threatening fiscal health by causing a massive fiscal deficit. One non-profit fiscal research group estimated that the additional fiscal deficit over the next 10 years due to the Trump administration's tax cuts would reach $7.5 trillion. An increase in the fiscal deficit can lead to a rise in government debt, weakening the demand for U.S. Treasury bonds and causing a 'crowding-out effect,' which drives up interest rates. This raises concerns that the tax cut policy may only be a short-term stimulus and could have a negative long-term impact on the economy.

5. The Third Leg: Comprehensive Deregulation

The third leg of the Trump administration's economic philosophy is the widespread deregulation policy that was implemented across the economy.

5.1. Scope and Key Areas of Deregulation

Abolition of Environmental and Climate Change Regulations: The Trump administration attempted to invalidate the Obama administration's eco-friendly 'Clean Power Plan' and signed an executive order simplifying environmental impact assessment procedures, outright rejecting the pro-environmental stance. This was a measure that significantly eased regulations on the fossil fuel industry in the name of energy security and economic recovery.
Financial Deregulation: Attempts were made to repeal or relax the 'Dodd-Frank Act' introduced after the 2008 global financial crisis, and the implementation of the final Basel III was halted or relaxed, while regulations on small and medium-sized banks were re-eased.
Other Industrial Deregulation: There were attempts to lower regulatory barriers in various fields, such as simplifying the space rocket launch permit process to support the private space industry and considering the relaxation of marijuana (hemp) regulations.

5.2. Pros and Cons Debate over Deregulation Policy

The Trump administration's deregulation showed a dual nature, generating expectations for industrial revitalization while increasing systemic risks. The shortened rocket launch permit period could contribute to the growth of the private space industry, but it was criticized for potentially causing environmental disasters due to an increase in rocket launches. The relaxation of financial regulations threatened the stability of the financial system, and the attempt to cut the Environmental Protection Agency (EPA) budget raised concerns about a weakened ability to respond to the climate crisis. This implies that while deregulation may bring short-term economic gains, it also carries long-term systemic risks.

6. Conclusion: The 'Three-Legged Stool,' The Other Side of Tax Cuts and Deregulation

While the Trump administration's tax cut and deregulation policies aimed to stimulate corporate investment and the private economy, they actually deepened wealth polarization, caused a massive fiscal deficit, and increased long-term risks to the environmental and financial systems. In the upcoming Part 3, we will comprehensively evaluate the overall interaction and limitations of the 'Three-Legged Stool' policy and suggest implications for the Korean economy.

The contents of this blog are for informational purposes only and should not be considered investment advice. Investment decisions should be made based on individual judgment and responsibility. Under no circumstances can the information in this blog be used as evidence for legal liability for investment outcomes.

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