I Asked ChatGPT What Would Happen if Trump Eliminated Income Tax — Here’s What It Said
Written by
Chris Adam
Edited by
Brendan McGinley
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
It’s an idea that probably sounds great to many Americans — get rid of income tax. President Donald Trump has floated that idea, a rare proposal from the government side. It’s also a thought that’s drawn plenty of feedback from both sides of the political aisle.
The President stated revenue accrued and investments secured from his trade policies could eliminate the need for income taxes, though economists consider it impossible even under the rosiest financial assumptions, Newsweek reported.
We asked ChatGPT to break down potential consequences into six key areas and noted they would be enormous.
A Massive Budget Hole (Around $2 Trillion per Year)
“It’s a transformational but extremely disruptive policy that could reshape the entire United States economy,” according to ChatGPT, and even that might be understating things.
As noted by ChatGPT, federal income tax is the government’s largest single source of revenue. Removing it would blow a multi-trillion-dollar hole in the federal budget. ChatGPT said some programs affected might include Social Security, Medicare, military spending, and agencies such as the FBI.
Replacement Taxes Would Almost Certainly Be Required
ChatGPT was clear: No modern government can function with a budget cut of this size. Some possible replacements could be a national sales tax of 20% to 30% or higher, a higher payroll tax, massive program cuts or new taxes on wealth, consumption or energy. It could also include a combination of these.
Economic Effects
The potential economic effects mentioned by ChatGPT were broken down into two groups — short-term benefits and potential negative or offsetting ones.
Short-term changes might include workers taking home more pay with high earners benefitting the most, or more investment and business activity. The potential negative effects may include higher deficits, higher sales taxes and cuts to federal programs.
Distributional Effects
“Income is progressive, where higher earners pay higher rates,” ChatGPT wrote. “Replacing it with sales taxes is regressive, where lower earners pay a higher share of their income.”
Based on this, ChatGPT said some people who would benefit the most include high-income earners, investors and corporations. On the other hand, lower and middle-income households, seniors on fixed incomes and families with high consumption but low savings may be hurt the most.
Legal and Political Reality
To keep it real, ChatGPT noted that a president cannot unilaterally remove income tax. It would require congressional approval, major changes to the tax code and possibly constitutional challenges.
Further, ChatGPT said that eliminating income tax is politically extremely difficult because:
- States rely on federal funding.
- Cuts would affect millions of Americans.
- It would be the largest fiscal reform in U.S. history.
International Consequences
ChatGPT suggested a trio of potential international consequences — the national debt growing faster, credit agencies downgrading the U.S. and global markets seeing this nation as fiscally unstable.
Editor’s note: While AI tools can assist in categorizing expenses and setting savings targets, they cannot replace the expertise and guidance of financial advisors.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
More From GOBankingRates
