Former President Donald Trump has floated a bold proposal: eliminate federal income taxes for Americans earning less than $150,000 annually. If implemented, this change could significantly boost take-home pay for millions of U.S. workers—but not without stirring economic debate over how the federal government would recoup the lost revenue.
What It Means for $150K Earners
An American earning $150,000 currently pays an effective federal income tax rate of around 16.83%, amounting to approximately $25,500 in annual taxes. Under Trump’s proposed plan, this entire amount would remain in the worker’s paycheck.
For example, instead of bringing home around $124,500, a person earning $150,000 annually could take home the full $150,000—a boost equivalent to receiving a 17% raise without changing jobs.
This idea was first reported by GoBankingRates, citing the substantial increase in disposable income such a plan would provide to middle-class Americans.
How Would the Government Fund It?
The major question is how the federal government would fund its operations without collecting income taxes from the vast majority of earners. According to Trump’s allies, the answer lies in tariffs on foreign goods.
Howard Lutnick, a Trump administration insider and acting Commerce Secretary, explained that the plan is to “generate revenue externally” by increasing tariffs, essentially making foreign countries pay into the U.S. economy. This model, Trump argues, could eliminate the need for internal tax collection from working Americans.
“If we charge tariffs on foreign goods, we can reduce or eliminate taxes on Americans,” Lutnick said in an interview covered by Kiplinger.
The Economic Concerns
While this proposal has caught the attention of many working Americans, economists and policy experts warn of significant downsides.
1. Tariffs Could Raise Consumer Prices
Tariffs are import taxes typically passed down from businesses to consumers. That means Americans could end up paying more for everyday goods—everything from electronics and clothing to food and fuel. While income tax may disappear from paychecks, the cost of living could climb.
2. Tariffs Are Regressive
Unlike income taxes, which are progressive, tariffs impact everyone equally, regardless of income. That means lower-income Americans would spend a greater portion of their earnings on goods affected by tariffs, making this proposal potentially regressive in nature.
According to The Guardian, Trump’s earlier tariffs during his presidency ended up costing the average household around $1,200 annually due to higher prices on imported goods.
3. Revenue Shortfall Concerns
Federal income tax makes up nearly 50% of all federal revenue, according to the Congressional Budget Office. Replacing this massive stream with tariffs would require unprecedented levels of imports or dramatic increases in tariff rates, which could disrupt trade relationships and economic stability.
Would This Plan Require Legislation?
Yes. Eliminating federal income taxes would require an act of Congress—meaning it’s far from guaranteed. The tax code is codified by law and overseen by the Internal Revenue Service (IRS), and sweeping changes would face political hurdles, even with a supportive administration.
Lawmakers would need to weigh the benefits of increasing take-home pay against the risks of inflation, trade wars, and budget shortfalls.
Current Status: Just a Proposal—for Now
As of now, this idea remains a campaign proposal. Trump has not formally introduced legislation, nor has Congress drafted a bill in support of the plan. It’s part of a larger tax reform strategy being discussed ahead of the 2024 presidential election, with Trump aiming to differentiate his economic vision from that of the current administration.
Still, the idea has sparked widespread conversation among voters and analysts alike, especially as inflation, wage stagnation, and cost-of-living concerns remain top issues in American households.
Key Takeaways:
- Americans earning $150,000 could keep $25,500 more annually under Trump’s no-income-tax plan.
- The plan would rely on tariffs on foreign goods to replace lost tax revenue.
- Economists warn of higher consumer prices, regressive impacts, and potential revenue gaps.
- The proposal is not yet law and would require Congressional approval.
This article has been carefully fact-checked by our editorial team to ensure accuracy and eliminate any misleading information. We are committed to maintaining the highest standards of integrity in our content.
Himanshu Sharma writes for Weekend Spy, focusing on recruitment, government schemes, and current affairs. He is dedicated to making complex information accessible to readers.
Himanshu enjoys playing chess, hiking, and trying new recipes, always seeking ways to combine his love for writing with his passion for exploration. Connect with Drop him an email at [email protected].
