Winners and Losers of Trump’s Tax Reform

President Trump's tax-cutting bill has passed in the U.S. Senate by a 51-50 vote, with J.D. Vance voting in the affirmative. Adding $3.3 trillion to the national debt, the legislation must go through the House again due to changes made to gain the support of several Republican senators.

This bill has driven a wedge between Trump and Musk, who has long supported the President's initiatives to reduce the national debt — not increase it through higher spending on the military and law enforcement.

The Arthur Laffer curve theory drives this current administration's approach. It posits that both 0% and 100% tax rates would yield 0% government revenue, with the optimal rate lying somewhere in between. Laffer, an economist, supported two Republican presidents: Ronald Reagan and Donald Trump.

However, the theory itself doesn't provide a precise tax rate, as the optimal rate depends on numerous variables, such as:

• The structure of the economy
• The type of tax
• Taxpayer behavior
• The existing tax base
• Institutional and enforcement quality

When Republican Ronald Reagan assumed the presidency, he inherited the following economic conditions after Democrat Jimmy Carter’s four-year term:

• High inflation: surged from 5.2% to 13.5%
• High unemployment rate: peaked at 7.2%
• Economic recession: GDP growth fell from 4.6% to -0.3%

The current U.S. administration is pursuing similar goals to Reagan's — cutting taxes and reducing government spending on social programs to encourage self-reliance rather than dependence on $30,000 welfare checks.

Though this approach is debatable, the transition from Carter's single term to Reagan's economically successful 1980s is a historical fact often cited by supporters of tax-cutting policy.

Major tax cuts always involve trade-offs. The aforementioned bill has caused Musk and Trump — two of the wealthiest and most influential individuals — to drift apart.

Now, the U.S. government provides a $7,500 per-vehicle incentive that significantly boosts Tesla's sales. Some analysts suggest that under the new GENIUS bill, Tesla could lose up to $2.6 billion in quarterly consumer incentives, affecting total sales, pricing, production, and overall growth.

This has prompted ARK Invest to extend its time horizon for Tesla stock, reaching a 10x return by two years — from 2027 to 2029. Despite this adjustment, their outlook remains highly optimistic.

ARK Invest argues that Tesla is not merely a car manufacturer but a software company. While its facilities produce physical goods, they are primarily designed to support the development of AI-driven software that will revolutionize both manufacturing and consumer services.

ARK Invest recently updated its forecast using the 75th and 25th percentile Monte Carlo method, a statistical model that generates a range of potential outcomes.

According to ARK, Tesla's robotaxi business is expected to become its most cash-generating segment due to several reasons:

• Safety: Tesla's autopilot is reportedly 5x safer than a human-driven Tesla and 16.6x safer than the average car. For example, Tesla vehicles currently average 3,200 miles per crash, compared to the national average of 192 miles.
• Price: With its extensive Supercharging network and accessibility, Tesla plans to offer rides for $0.20 per mile, whereas Uber's prices range from $1.50 to $6.50 per mile. This could position Tesla to capture 40-60% of the ride-hailing market, surpassing Uber’s 20-30%.

Despite the potential legislative changes, ARK Invest anticipates Tesla's vehicle production to grow 45% annually through 2029, rising from 1.8 million units per year to between 6 and 16 million units.

As incentives for retail buyers are phased out, Tesla may shift its focus toward fleet owners, potentially streamlining the sales funnel.

Tesla’s Other Growth Divisions

Another key division is robotics. Musk's recent post on X with a dancing robot signaled a promising future for many investors — and a potential 10-20% workforce reduction at Tesla.

General-purpose humanoid robots represent an estimated $24 trillion global revenue opportunity at scale, and Tesla aims to capture a significant share.

Also, Tesla's stationary energy storage segment is expected to grow even faster than its automotive division, reaching 850GWh of energy capacity by 2029.

If Tesla’s Supercharger network for autonomous vehicles continues its current expansion, utilization could increase from ~11% to the ~34% typical of gas stations.

Lastly, Tesla is moving into AI-as-a-service, planning to offer distributed AI inference-as-a-service (IaaS). This could become a powerful new revenue stream, as it aligns with Tesla’s long-term vision of monetizing its AI capabilities.

While the exact applications of AI in this context remain unclear, demand for AI is skyrocketing, and Tesla is well-positioned to capitalize on this trend.

This article was written in cooperation with TradingView