President Donald Trump intends to eliminate your taxes if your annual income falls less than $150,000, U.S. Commerce Secretary Howard Lutnick said in an interview with CBS on Tuesday.
“His objective is clear: none taxes for everyone making less than $150,000 annually. His objective is that. I am aiming for it in the interview.
Lutnick also highlighted Trump’s intentions to cut Social Security taxes, overtime, and tip taxes. Other tax ideas Trump offered in 2024 and earlier this year include allowing a tax deduction for vehicle loan interest payments and simplifying the income tax regulations expatriate Americans have to abide by.
Trump has also discussed replacing the Internal Revenue Service, or IRS, with an External Revenue Service to gather funds from abroad. Furthermore, with a lot of tariffs, he has attacked some of the largest trading partners of the United States since assuming office in January.
For many of Trump’s tax proposals, however, particular specifics are rare and far between.
Carl Johnson, a New Orleans certified public accountant, finds it difficult to evaluate how the proposed tax decrease for those making $150,000 or less will function without more information.
“I’m not very hopeful about the way it is portrayed as a broad-based cut,” he says. Johnson claims that the proposal may contain clauses allowing some taxpayers to qualify while not others.
Furthermore, the concept of removing taxes for individuals making $150,000 or less might only pertain to income taxes and most likely won’t remove the payroll taxes American workers pay toward Medicare and Social Security. Based on information from the U.S. Congress Joint Committee on Taxation, a majority of taxpayers earning less than $200,000 pay more in payroll taxes than income taxes.
Congress is currently considering extending the Tax Cuts and Jobs Act as well. Originally passed in 2017, during Trump’s first term, the broad law brought about among other changes reduced income tax rates, a nearly doubling of the standard deduction, and a far more substantial child tax credit. Unless Congress moves, all of these clauses are slated to expire at the end of this year.
Social Security income is not taxed.
Trump put several plans to lower taxes for Americans forth throughout his presidential campaign. For instance, Trump declared he wanted taxes on Social Security retirement benefits for elderly gone entirely.
Retirees with low incomes typically do not owe taxes on their Social Security benefits; individuals who get income from other sources, such earnings or rental income, may incur income tax on up to 85 percent of their benefits.
Eliminating taxes on Social Security benefits would help those earning between $63,000 and $200,000 the most, claims the Tax Policy Center.
Experts warn, though, that Social Security tax cuts could have negative consequences. A Tax Foundation analysis shows that exempting Social Security from income tax will hasten the insolvency of the trust fund and widen the budget deficit by $1.6 trillion over ten years.
Stopping taxes on overtime and tip income
Trump also promised to remove income taxes on tips and overtime earnings, but his government has not yet specifically addressed how those ideas will be implemented.
The Tax Foundation cautioned, meanwhile, that doing away with overtime taxes could skew the labor force. More workers would search for employment that pay overtime as salaried positions are free from overtime laws.
Overall, bottom line
Trump has promised to drastically alter tax laws during his second term, even though it is unknown exactly how his proposal to stop taxes on income of less than $150,000 would be carried out.
Johnson claimed Americans should expect major tax-law changes during Trump’s second term in power given a Republican-dominated Congress.