Trump Wants To Eliminate Income Taxes: Here’s How Much Extra You’d Take Home If You Make $75K a Year
Written by
G. Brian Davis
Edited by
Ashleigh Ray
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President Donald Trump has floated the idea of eliminating individual income taxes. At a conference earlier this year, he said, “Instead of taxing our citizens to enrich foreign nations, we should be tariffing and taxing foreign nations to enrich our citizens,” Fox Business reported.
What exactly would that mean for a household earning $75,000 per year?
The Numbers
For a married couple filing jointly, eliminating income taxes would save them $5,032, based on 2024 tax rates and deductions.
Here’s how that number breaks down: Assuming the couple takes the standard deduction, they knock $29,200 off their income, for a taxable income of $45,800. The first $23,200 of that gets taxed at the 10% tax rate, or $2,320 in taxes, and the next $22,600 gets taxed at the 12% tax rate — $2,712 in taxes.
That comes to $5,032 in regular federal income taxes.
A single taxpayer would save more: $8,341, to be precise. They only get the standard deduction once, so their taxable income is $60,400. They pay $1,160, or 10%, on their first $11,600 in income, $4,266 — 12% — on their next $35,550 and $2,915, 22%, on their next $13,250.
FICA Taxes
Trump has not clarified if he also intends to eliminate the FICA taxes that fund Social Security and Medicare.
Employers and employees split these taxes. Each pays 7.65%, for a combined total of 15.3%. Self-employed workers pay both sides, for a stinging 15.3%.
If the president did cut FICA taxes, too, that would save these households $5,738 per year. The number applies to both single and married taxpayers, since deductions and margins don’t apply to FICA taxes.
Implications and Risks
Those savings sound great on paper. But what are the potential downstream effects of ditching these taxes?
Risk of Replacement Taxes
In fiscal year 2024, the Treasury Department collected $2.43 trillion in individual income taxes. They made up 49.3% of all revenue.
The federal government could cut some spending, but the Trump administration has not claimed they’ll be able to cut $2.43 trillion from the budget.
That means they’ll need other sources of revenue. Read: other types of taxes.
The administration has already announced sweeping tariffs to tax imported goods. Despite the enormous scale of the tariffs, they are unlikely to raise $2.43 trillion.
“The federal government would need to implement alternative ways to make up for the lost revenue,” explained Thomas Brock, CFA and expert contributor with Retire Guide. “Most likely, this would translate to a consumption tax, such as a national sales tax or value-added tax (VAT), and/or a reduction in public benefits and services.”
Lost Safety Net for Low Earners
Some low-income families actually get more in refundable tax credits than they pay in taxes. In other words, income taxes are a net positive for them — a form of wealth redistribution.
Jillian Hishaw, attorney and owner of Hishaw Law, is already seeing an uptick in bankruptcy filings among low-income families. “I am currently overwhelmed with bankruptcy flings. Families that make less than $75,000 often depend on refunded tax credits, and when these families declare bankruptcy, they declare a Chapter 7.”
That’s a liquidation bankruptcy, where all their assets get sold to pay off debts. In many cases, creditors walk away with nothing, since many of these households don’t have meaningful assets to sell.
And that says nothing of reduced spending on government support programs for lower-income earners.
Lost Incentive Structure
The federal government uses income tax breaks to incentivize behaviors they want to encourage. It’s a form of behavior management by the government.
“Without taxes, some tax incentives, such as retirement contributions, would disappear,” said Chad Gammon, CFP at Custom Fit Financial. “Taxpayers might not save as much for retirement.”
Retirement accounts aren’t the only tax incentive designed to modify Americans’ behavior. Other examples include child tax credits and the mortgage interest deduction.
In short, it would be logistically difficult, if not impossible, for the Trump administration to actually eliminate income taxes. There’s just too much money at stake for the government. They may lower tax rates or move the brackets to lower effective taxes for lower earners, but don’t get your hopes up about skipping your tax filing next year.
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.
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