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If you make less than $150,000 a year, President Donald Trump wants to abolish your taxes, U.S. Commerce Secretary Howard Lutnick said in an interview with CBS on Tuesday.
“I know what his goal is: No tax for anybody who makes less than $150,000 a year. That’s his goal. That’s what I’m working for,” Lutnick said in the interview.
Lutnick also mentioned Trump’s plans to eliminate taxes on tips, overtime pay and Social Security. Other tax proposals that Trump floated in 2024 and earlier this year include creating a tax deduction for interest payments on car loans, and easing the income tax rules that expatriate Americans must follow.
Trump has also talked about eliminating the Internal Revenue Service, or IRS, in favor of an External Revenue Service, to collect money from foreign sources. And since taking office in January, he’s hit some of the U.S.’s biggest trading partners with a slew of tariffs. Read more about Trump’s tax plans.
But specific details for many of Trump’s tax proposals are few and far between.
Without knowing more about the proposed tax cut for those earning $150,000 or less, it’s difficult to assess how the plan would work, says Carl Lewis, a certified public accountant in New Orleans.
“I’m not very hopeful about the way it is presented as a broad-based cut,” he says. According to Lewis, the plan could include provisions that allow some taxpayers to qualify but not others.
Also, the idea of eliminating taxes for those earning $150,000 or less may refer solely to income taxes, and likely wouldn’t eliminate the payroll taxes that U.S. workers pay toward Social Security and Medicare. A majority of taxpayers earning less than $200,000 pay more in payroll taxes than income taxes, according to a report by the Tax Foundation in 2019, based on data from the U.S. Congress Joint Committee on Taxation.
Meanwhile, Congress is currently debating the extension of the Tax Cuts and Jobs Act. The sweeping legislation, initially enacted in 2017, during Trump’s first term, brought about lower income tax rates, a near-doubling of the standard deduction and a much more generous child tax credit, among other changes. All of these provisions are set to expire at the end of this year, unless Congress acts.
No taxes on Social Security income
During his presidential campaign, Trump proposed many initiatives to cut taxes for Americans. For example, Trump said he wants to eliminate taxes on Social Security retirement benefits for seniors.
While retirees with low incomes generally don’t owe taxes on their Social Security benefits, those who receive income from other sources, such as wages or rental income, may owe income tax on up to 85 percent of their benefits.
According to the Tax Policy Center, a plan to eliminate taxes on Social Security benefits would benefit beneficiaries earning between $63,000 and $200,000 the most.
However, tax cuts for Social Security could come at a price, according to experts. Exempting Social Security benefits from income tax would increase the budget deficit by $1.6 trillion over ten years and accelerate the trust fund’s insolvency, according to a report by the Tax Foundation.
Ending taxes on tips and overtime pay
Trump also has pledged to eliminate income taxes on tips and overtime income, but his administration hasn’t yet detailed how those plans will work.
However, the Tax Foundation warned that eliminating overtime taxes could distort the labor market. Since salaried positions are exempt from overtime rules, more employees would seek jobs that offer overtime pay.
Bottom line
While it’s unclear precisely how Trump’s plan to end taxes on income of less than $150,000 would be implemented, he has vowed to change tax rules considerably during his second term.
Lewis said he expects that, with a Republican-controlled Congress, Americans should expect significant tax-law changes to take place during Trump’s second term in office.
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