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Secretary of Commerce Howard Lutnick has reinforced President Donald Trump’s ambitious tax goal—eliminating income taxes for Americans making less than $150,000 annually. This plan echoes Trump’s previous promises to “abolish” income taxes, aiming to provide financial relief for most American workers. However, while the proposal resonates with many taxpayers, questions abound regarding its feasibility within the current fiscal framework.
Can Tariffs Replace Income Taxes?
most Trump’s vision of abolishing taxes for most U.S. workers would have profound effects, as nearly three-quarters of American workers earned less than $150,000 in 2023. However, individual income taxes are the largest source of federal revenue, accounting for over 50% of total receipts. In fiscal year 2025, personal income taxes contributed $959 billion, while customs and import duties brought in a mere $35 billion—roughly 1.9% of total tax revenue.
To offset this loss of income tax revenue, Trump’s administration has suggested tariffs—taxes on imported goods—could fill the gap. But economists at the Peterson Institute for International Economics estimate that tariffs under Trump’s current policies would generate about $225 billion annually. This sum falls short of what’s needed to make up for eliminating taxes on $150K earners, who contribute a significant portion to federal revenue.
The Economic Reality: More Costs, Less Relief
While tariffs could provide a revenue boost, they are unlikely to benefit lower- and middle-income households as intended. Economic studies suggest that tariffs raise the cost of imported goods, disproportionately impacting those with lower purchasing power. This could increase everyday costs for Americans in the income bracket targeted by Trump’s tax reform.
Further complicating matters, Trump’s administration is working to extend the 2017 Tax Cuts and Jobs Act, which is set to expire at the end of the year. While these tax cuts are designed to offset the impact of rising costs from tariffs, they are expected to primarily benefit higher-income earners. A study by the Peterson Institute found that only the wealthiest 20% of U.S. households would see a net benefit from these tax policies, while the remaining 60% would face negative financial consequences.
Is This Plan Achievable?
In short, Trump’s vision of eliminating income taxes for those earning less than $150,000 seems increasingly unrealistic. Far from providing tax relief, the combination of tariffs and extended tax cuts for high-income earners may drive up the cost of living for most Americans.
As a result, the promise of no taxes for this income group could translate into higher costs across the board, leaving many households with less disposable income. For those in this income bracket, it may be wise to take proactive steps in preparing for rising living expenses and potential financial disruptions.
Setting aside additional savings and planning for potential economic fluctuations can provide peace of mind during these unpredictable times. A larger financial cushion allows families to weather unforeseen circumstances, such as rising costs or sudden job changes, without compromising long-term financial stability.
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