President Donald Trump is floating a radical tax policy that could eliminate federal income taxes for those earning less than $150,000 per year.
U.S. Commerce Secretary Howard Lutnick confirmed the plan and said it could completely change how the government collects revenue. Were this to move forward, millions of Americans would get to keep substantially more of their income.
The proposal comes as Trump’s 2017 tax cuts near expiration and with tax policy poised to be a central election issue. The administration is weighing options beyond conventional income taxes. Instead of imposing levies on its own citizens, Trump’s proposal would aim to reap revenue from abroad, partly by charging a “membership fee” against trading partners. It’s an idea to replace internal tax revenue with external contributions so as to reduce the financial burden on American workers.
This can be equated to thousands of dollars saved for middle-class earners. From the current tax brackets, those making $100,000 a year pay approximately $15,000 in federal income taxes. With this proposal, they may take that full amount home, which would then significantly increase personal finances. This, according to supporters, increases spending, thereby stimulating the economy and improving the financial situation for many millions.
Critics wonder how the government would make up for such a huge source of revenue. Federal income taxes in 2023 accounted for nearly half of all government funds. Skeptics say, without clear replacement funding, it may underfund important services such as Social Security, Medicare, and defense. Others say it could provoke economic retaliation and raise the cost of goods and services for Americans if moved onto international trade.
This is a politically fraught proposal, as well. While Trump allies are pressing for ambitious overhauls to taxes, it will not be that easy to move such a drastic change through Congress.
🚨BREAKING: Commerce Secretary Howard Lutnick says President Trump wants no taxes for people who make less than $150,000 a year.
pic.twitter.com/J1COS3sMxm— Benny Johnson (@bennyjohnson) March 13, 2025
Members from both parties will consider the effectiveness of the plan and its impact on the economy. Some say that even if the proposal does not pass, some type of version could be moved forward to help take some of the pressure off middle-class Americans when it comes to taxes. With tax season in full gear, millions are paying close attention.
If this plan gains momentum, it could be one of the biggest tax policy changes in U.S. history. Trump’s team is expected to release more details soon, and as the election draws closer, this proposal could become a major talking point in debates over economic policy.
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