Trump’s tax plan to eliminate income tax for Americans earning under $150,000 could save families up to $24,000 annually, but experts warn it may drastically increase federal debt while giving corporations an excuse to keep wages low.
Quick Takes
- President Trump’s tax plan would eliminate income tax for Americans earning under $150,000, potentially saving some families up to $24,000 annually.
- The plan would affect approximately 93% of Americans and includes no tax on tips, overtime, or Social Security for eligible earners.
- Commerce Secretary Howard Lutnick claims the plan can be funded through tariffs on foreign nations and by addressing overseas tax evasion schemes.
- Financial experts express serious concerns about the plan’s impact on federal deficits and long-term national debt.
- Critics argue the plan could reduce pressure on corporations to provide livable wages while shifting financial burdens to taxpayers.
The $150,000 Tax Exemption Plan
President Donald Trump has unveiled an ambitious tax initiative that would eliminate income tax for Americans earning less than $150,000 annually. This sweeping proposal, supported by Commerce Secretary Howard Lutnick, could potentially save qualifying taxpayers up to $24,000 per year. The plan goes beyond just income tax elimination, with additional provisions to abolish taxes on tips, overtime, and Social Security benefits for the same income bracket. According to Lutnick, this tax exemption would cover approximately 93% of American taxpayers, representing one of the most significant tax overhauls in modern American history.
The proposal aims to replace lost income tax revenue with an “all-tariff” policy, effectively shifting tax burdens from American workers to foreign imports. Trump’s administration argues this approach would not only provide immediate financial relief to lower and middle-income Americans but would also stimulate economic growth by increasing consumer spending power. Lutnick has been particularly vocal about the proposal’s potential benefits, describing it as a transformation of America’s economic foundation.
No taxes for people who make less than $150,000/yr is the supercharge this economy needs to IGNITE.
— Rep. Mike Collins (@RepMikeCollins) March 13, 2025
Funding the Tax Cut Through Tariffs and Tax Evasion Crackdown
Lutnick emphasized how the administration plans to fund this massive tax cut without increasing the national debt. The primary mechanism would be imposing tariffs on foreign nations trading with the United States. Lutnick characterized this approach as charging other countries for access to the world’s largest consumer market. This strategy aligns with Trump’s previous trade policies that emphasized using America’s economic leverage to renegotiate trade relationships.
Additionally, Lutnick highlighted plans to crack down on overseas tax evasion. He specifically mentioned targeting practices such as ships registering under foreign flags to avoid U.S. taxes and American companies holding intellectual property in countries like Ireland to reduce their tax obligations. The administration also proposed a $5 million “Gold Card” visa program that would offer Green Card privileges and a path to citizenship, potentially generating additional revenue to offset tax cuts.
Economic Concerns and Expert Skepticism
Despite the proposal’s potential appeal to voters, financial experts have expressed significant concerns about its economic viability. Critics argue that the plan could dramatically increase the federal deficit and national debt, creating long-term financial problems for future generations. The magnitude of revenue loss from eliminating income tax for earners under $150,000 would be substantial, and many economists question whether tariffs and anti-evasion measures could realistically make up the difference.
“Eliminating income tax on those making less than $150,000 would obviously be a huge economic stimulus to a group of taxpayers who have been on the smaller end of recent tax cut efforts. This effort that would support lower and middle class homes additionally in a big way will undoubtedly find support, but the question is how much would it add to a ballooning deficit. The new administration is betting new tariffs and other international taxes could fill in the gap of this lost tax revenue, but history shows that assumption isn’t always a sound one. Basically, this is a wait-and-see story on all fronts,” said Alex Beene, financial literacy instructor for the University of Tennessee at Martin.
Public Reactions
Public reaction to the proposal has been mixed, reflecting broader economic and political divisions. Some Americans enthusiastically support the potential for increased take-home pay and the shift of tax burdens to foreign imports. Others worry about fairness issues, the impact on higher earners, and potential incentives for income manipulation to stay under the $150,000 threshold. As the administration continues to develop and promote this tax plan, these debates are likely to intensify, particularly as more specific implementation details emerge.
