The Trump administration has reportedly floated a new tax plan that could eliminate income taxes for individuals earning less than $150,000 a year. While details remain scarce, Commerce Secretary Howard Lutnick confirmed the proposal in an interview with CBS News.
Trump’s Vision for Tax Cuts
“I know what his goal is — no tax for anybody making under $150,000 a year,” Lutnick stated. “That’s his goal. That’s what I’m working for.”
The administration’s broader tax strategy also includes the elimination of taxes on Social Security benefits, tips, and overtime pay. Additionally, Trump has repeatedly expressed interest in abolishing the IRS and replacing it with a revenue stream generated from tariffs.
How Many Americans Earn Less Than $150K?
According to data from the U.S. Census Bureau, over 76% of individuals in the country earn below the $150,000 threshold. Some estimates suggest this number could be closer to 90%.
In 2025, the average U.S. household income stood at $80,610, with the following median incomes by age group:
- $85,780 for those aged 25 to 34
- $101,300 for individuals aged 35 to 44
- $110,700 for those aged 45 to 54
- $90,640 for the 55 to 64 age bracket
- $54,710 for those 65 and older, potentially including retirement benefits
Data from 2023 further highlights the breakdown of U.S. household income:
- Under $15,000: 7.4%
- $15,000 to $24,999: 6.7%
- $25,000 to $34,999: 6.9%
- $35,000 to $49,999: 10.3%
- $50,000 to $74,999: 15.7%
- $75,000 to $99,999: 12.1%
- $100,000 to $149,000: 17%
- $150,000 to $199,999: 9.5%
- $200,000 and over: 14.4%
(Source: U.S. Census Bureau, Table A-2 Households by Total Money Income, Race, and Hispanic Origin of Householder: 1967 to 2023.)
Key Concerns About Trump’s Proposal
While eliminating income taxes for those earning under $150,000 may sound appealing, it raises several economic concerns:
- Revenue Shortfalls: How will the government compensate for lost tax revenue?
- Work Incentives: Could eliminating taxes for a large segment of earners impact workforce participation?
- Potential Sales Tax Increases: Would a nationwide sales tax be introduced to offset revenue losses?
- Tax Fairness: Would earners just above the $150,000 threshold bear an unfair burden?
Tariffs as a Revenue Source
Lutnick suggested that tariffs on foreign nations would replace lost tax revenue. “His [Donald Trump’s] goal is to have external revenue,” Lutnick said. “The rest of the world leans on our economy, breathes off our economy. Let them pay a membership fee.”
However, economic experts argue that tariffs alone may not generate sufficient funds. Import taxes are often paid by U.S. businesses and passed down to consumers, making tariffs a form of regressive taxation that disproportionately impacts lower- and middle-income households.
During Trump’s 2018 trade war with China, the administration authorized $61 billion in relief payments to U.S. farmers and ranchers affected by retaliatory tariffs, raising further questions about the sustainability of tariffs as a long-term revenue source.
Trump’s Next Steps on Taxes
Despite the bold proposal, the Trump administration has not provided specifics on how or when it would implement these tax changes. Instead, the focus has remained on tariffs.
- In his first 50 days back in office, Trump’s administration has engaged in tariff disputes with Canada, Mexico, Colombia, China, India, and the European Union.
- On March 12, Trump imposed a global 25% tariff on all aluminum and steel imports to the U.S.
- Additional tariffs, including a 25% tariff on Canadian and Mexican imports, are set to take effect on April 2.
Reports also indicate that the administration is exploring the creation of an External Revenue Service to collect tariffs from foreign nations, potentially replacing the IRS and U.S. Customs and Border Protection (CBP).
While Republican lawmakers work to extend or make permanent Trump’s previous Tax Cuts and Jobs Act (TCJA), it remains uncertain whether this latest tax proposal will gain traction. Observers will be watching closely to see if plans to eliminate taxes for those earning under $150,000—along with other promised tax cuts—make their way into future legislation.
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