🔮When Tax Cut?

Are Republicans About to Touch the Third Rail of US Politics?

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Yesterday, the House passed a continuing resolution that, barring a last-minute Trump intervention or Senate filibuster, will keep the Federal government funded through September 30th, avoiding a shutdown. 

During the debate, each side accused the other of distorting the bill’s true contents, but on Polymarket, you could watch the whole debate unfold in a single chart: 

• Shutdown odds rising with Trump’s aggressive post-inauguration moves; 
• Peaking with Senate Democratic leader Chuck Schumer’s threats of a “Trump shutdown;”  
• Settling down as the House passed the continuing resolution

What (and Who) is On the Table?   

The budget debate shows we are now reaching the point in the Trump presidency where the rubber meets the road.. 

• Are we going to get tax cuts? 
• What programs will be cut to pay for them? 

Instead of reading thousands of words from DC pundits, let’s take a spin through Polymarket to see what odds bettors around the world are placing on these outcomes:  

Tax Cuts? 

Here’s what the markets say about the prospects for a Trump tax cut this year: 

• Cuts to long-term capital gains taxes in 2025 - 🔮 56% odds (spiked around the time of Trump’s speech to Congress although the policy was not explicitly mentioned).  
• Cuts to income taxes for high earners in 2025 - 🔮 29% odds (steady since January) 
• Any cuts to corporate taxes in 2025 - 🔮42% odds 
• End to capital gains taxes on crypto by June - 🔮 9% odds 

New Deal in Reverse? 

It’s no secret that Trump is looking to take a bite out of the $36t US debt by reducing the size and scope of the Federal government, a policy that historian Niall Ferguson compares to the New Deal, but in reverse. 

And while Trump has pledged to protect Medicare, Medicaid, and Social Security at various times, Republicans have been talking about large savings to the programs through tackling waste, fraud, and abuse. 

So what’s it going to be? Looking at several markets together gives us a picture of where things stand:

Medicaid. Most likely to be cut (🔮53% odds), is Medicaid. This health program for low income Americans cost $592b in 2024, or about 9% of the Federal budget. A CBO report released on March 5 stated that reaching the $880b target would require cuts to Medicaid, which spiked the odds for cuts on Polymarket.

Medicare. The CBO report, also spiked odds of cuts to Medicare, the healthcare program for seniors which made up $848b of the Federal budget last year.  

Trump has pledged multiple times not to cut Medicare, but Republicans have been speaking about using DOGE to trim abuse and fraud from both health programs, and the market seems to be reading between the lines here.

Defense. What about the military, which was $850b of the 2024 budget? Odds for defense cuts this year spiked as high as 47% on reports that Pete Hegseth ordered Pentagon officials to prepare for cuts. But the latest House budget calls for a $6b increase in military spending.

Social Security. Despite Democratic warnings, Social Security, the $1.4T third rail of American politics, is the least likely of all major programs to be cut - just 9% chance for cuts by July. This market has also been the least volatile of the bunch, indicating it is  truly a sacred cow. 

Notably, a recent Fox interview of Elon Musk where he floated Social Security cuts, failed to move this market even a single point.    

Balance Budget? Will all these cuts balance the budget? Almost certainly not: there’s only a 7% chance DOGE balances the Federal budget this year. 

In fact, the 2025 DOGE cuts market is seeing <$50b in cuts this year, the lowest bracket, as most likely.

New Tariffs? 

Finally, another core part of the Trump economic agenda is Tariffs. 

While most drama has been focused on Canada and Mexico, where tariff negotiations are unfolding minute-by-minute, it’s notable that odds are still high for tariffs to be slapped on the EU in the coming weeks. 

🔮Visit Polymarket.com for up-to-the-minute odds on all aspects of the Trump presidency.

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