Is Trump Really Eliminating Taxes for Americans Under $150K?

The Trump administration is floating a bold new tax proposal: If you earn less than $150,000 a year, you won’t pay federal income tax. U.S. Commerce Secretary Howard Lutnick revealed this plan during a CBS interview, emphasizing that it is a key priority in President Trump’s economic agenda. According to the latest U.S. Census Bureau data, over 76% of individuals in the country earn less than $150,000 annually. If implemented, the plan would exempt a vast majority of the country from federal income taxes. While this proposal may sound like music to the ears of millions of Americans, tax professionals and economists are raising serious concerns about its feasibility and the long-term effects of such a sweeping policy shift.

The Missing Details

President Trump’s pitch to eliminate taxes for individuals earning less than $150,000 could benefit most of the U.S. population. In 2023, data show the average household income was $80,610. A breakdown of average earnings by age group wasn’t close to $150K. For instance, the median household income was:

• $85,780 for those between the ages of 25 to 34
• $101,300 for 35 to 44-year-olds
• $110,700 for 45 to 54-year-olds
• $90,640 for 55 to 64-year-olds
• $54,710 for those 65 and older

That figure may count in retirement earnings such as Social Security benefit checks. However, a deeper analysis shows that less than a quarter of individuals in the U.S. earn more than $150,000.

Taxpayers Stuck Holding the Bag

Trump’s previous tax cuts, most notably the 2017 Tax Cuts and Jobs Act (TCJA), disproportionately benefited corporations and high-income earners. Many of those breaks are set to expire by the end of 2025. If this new plan moves forward, who will be left to fund the government? The wealthiest Americans and corporations already pay a disproportionately large share of federal income taxes, those earning over $200,000 annually account for nearly 80% of all federal income tax revenue. If those earning less than $150,000 are removed from the tax base, it means:

• The remaining taxpaying individuals and businesses will have to shoulder the burden, or
• The government will need to introduce new revenue streams (like tariffs or significant spending cuts).

Lutnick has floated ideas like cracking down on overseas tax evasion and selling “golden visas” for $5 million each as revenue generators, but experts remain skeptical that these measures would be enough to replace the revenue shortfall.

A House of Cards

One major concern is the impact on Social Security and Medicare. If payroll taxes are included in the tax elimination, the programs could be starved of funding. Payroll taxes generated $1.23 trillion in 2023, accounting for roughly 90% of Social Security’s revenue. Without a clear replacement, the financial future of these essential programs remains uncertain. Social Security’s trust fund is already projected to run out by 2034 under current tax policies. Exempting most workers from contributing payroll taxes would accelerate that timeline drastically. The options to fix this gap aren’t pretty:

• Raising the retirement age: This means future retirees will have to work much longer before receiving benefits.
• Benefit cuts: Slashing Social Security payouts to retirees and the disabled.
• Shifting to a privatized system: A controversial option that has been floated before but remains deeply unpopular.

Economic Growth vs. Fiscal Reality

Trump’s tax proposal is being marketed as a way to boost the economy by putting more money in the pockets of middle-income Americans. Theoretically, eliminating taxes for this group would increase disposable income, leading to higher consumer spending and economic growth. However, there’s a catch: inflation. If tax cuts aren’t offset by spending cuts or new revenue sources, they could fuel demand without a corresponding supply increase, driving prices up. Moreover, if Trump’s tariff policies escalate, consumers could see those extra dollars eaten up by higher prices on imported goods.

The Ultimate Referee

Despite Trump’s confidence in the proposal, getting Congress to approve such an ambitious tax overhaul is far from guaranteed. While the Republican-controlled House may be open to the idea, the Senate, where fiscal hawks are already wary of growing deficits, could be a roadblock. Even if the plan gains traction, major modifications will likely be required to make it fiscally viable. Given the sheer scale of the revenue loss (estimated between $5 trillion and $11.2 trillion over the next decade), Congress will have to wrestle with how to fill the gap. Possible solutions could include higher corporate taxes, increased tariffs, or a national consumption tax.

The Bottom Line

Trump’s tax proposal is ambitious. For those earning under $150,000, the prospect of eliminating federal income taxes is undeniably appealing. However, the plan raises massive fiscal concerns, particularly regarding Social Security and Medicare—while leaving open the question of how the government would make up the lost revenue. For accountants, tax professionals, and financial advisors, this proposal presents a potential seismic shift in tax planning and federal revenue policy. If passed, it would alter deductions, credits, and planning strategies for clients in all income brackets. Until more details emerge, professionals should be prepared for a tax debate that could reshape financial planning in the years to come. Be the First to Know! Subscribe for Exclusive MYCPE ONE Insights on Tax Breaks, Market Trends, and Financial Strategies That Impact You.