Sounds incredible, right? Let’s break down what that could really mean—and what trade-offs might come with it.

What It Means for Everyday Americans

If you’re earning $150,000 as an individual, you’re currently in the 24% marginal tax bracket. For a married couple filing jointly, you’re in the 22% bracket. Eliminating income taxes for these groups could result in massive savings:

• Individuals: Save over $25,000 a year, or about $2,000/month.
• Married couples: Save over $16,000 a year, or $1,300/month.

That kind of financial boost could mean more room to save, invest, pay down debt, or even take a vacation without stressing about your budget. In theory, this would be a huge win for the middle class.

But How Would the Government Make Up the Difference?

Here’s where things get complicated.

Households earning under $200,000 currently contribute 41% of all federal income taxes, and those earning under $100,000 contribute about 10–15%. Eliminating those contributions would blow a major hole in government revenue.

Secretary Lutnick’s solution? Replace the Internal Revenue Service with what he calls an “External Revenue Service”—in other words, tariffs on international trade.

The idea is to make foreign countries help fund our economy since we buy so many of their goods and services. It sounds patriotic, but it’s also a big gamble.

Tariffs: Who Really Pays?

On paper, tariffs seem like a great solution—shift the tax burden from Americans to other nations. But here’s the reality: when tariffs go up, imported goods become more expensive, and American consumers foot the bill.

So, while you might save money on your taxes, you could end up paying more at the grocery store, the hardware store, and even when buying a car or electronics. In short, the cost could circle right back to you.

What About Higher Earners?

If this plan moves forward, those earning over $150,000 may still pay income taxes—possibly at higher rates. That raises questions:

• Would high-income earners face a heavier tax burden?
• Would this discourage people from striving to earn more?
• Could it widen the economic divide or disincentivize productivity?

It’s something we all need to think about, regardless of which side of the income line we fall on.

Let’s Talk About It

I know a lot of people love the idea of paying zero federal income taxes. Who wouldn’t? But before we pop the champagne, we have to understand the trade-offs.

Personally, I think this kind of conversation is worth having, even if the proposal isn’t law (yet). I want to hear from you:

• Would you trade income taxes for tariffs?
• Do you think this plan is fair?
• How do you see it impacting your household?

Leave your thoughts in the comments—I’d love to start a conversation around this.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

The post Proposal to Eliminate Federal Income Taxes for Americans Earning Less Than $150k appeared first on ROI TV.

1. Proposal to Abolish Income Tax

President Trump’s Tax Act of 2025 aims to abolish the Internal Revenue Service (IRS) and eliminate the need for income taxes. The plan involves creating a new entity, tentatively named the External Revenue Service, to collect revenue through tariffs on imported goods, thereby shifting the tax burden from individual and corporate income taxes to tariffs.

politico.com

2. Current Tax System Overview

The existing U.S. tax system comprises various taxes, including income, payroll, capital gains, corporate, property, estate, sales, and tariffs. In 2024, the IRS collected approximately $5.1 trillion in income taxes, with around $4.5 trillion net after refunds. To replace this revenue solely with tariffs would require a substantial increase in tariff collections.

taxfoundation.org

3. Feasibility of Replacing Income Tax with Tariffs

Replacing income tax with tariffs presents significant challenges. In 2022, the U.S. imported goods worth $3.35 trillion, generating $111 billion in tariffs. To match the $4.5 trillion income tax revenue, an across-the-board tariff of approximately 130% on all imports would be necessary, which is impractical and could have severe economic repercussions.

taxfoundation.org

4. Potential Economic Impact of Tariffs

Implementing high tariffs could lead to increased prices for imported goods, with costs likely passed on to consumers, resulting in higher inflation. Historical instances, such as steel tariffs, have shown mixed results, with initial price hikes followed by declines. The overall impact on inflation would depend on factors like the scope of tariffs, affected countries, and potential retaliatory measures.

piie.com

5. Financial Advice and Economic Understanding

Given the potential changes in the tax system, individuals are advised to enhance their understanding of economic principles and personal finance management. Emphasizing saving and prudent investing becomes crucial to maintain financial stability amidst such transitions.

Conclusion

While the proposal to replace income tax with tariffs is innovative, its feasibility remains questionable due to the substantial increase in tariffs required and the potential economic consequences. Careful consideration and further analysis are essential to assess the viability and impact of such a significant shift in tax policy.

Jaspreet Singh is not a licensed financial advisor. He is a licensed attorney, but he is not providing you with legal advice in this article. This article, the topics discussed, and ideas presented are Jaspreet’s opinions and presented for entertainment purposes only. The information presented should not be construed as financial or legal advice. Always do your own due diligence.

The post President Trump Wants to Eliminate the IRS appeared first on ROI TV.