Former President Donald Trump has proposed eliminating federal income taxes for individuals earning less than $150,000 per year, a policy that could lead to substantial changes in the finances of millions of Americans. According to Newsweek, this proposal would mean a significant boost in take-home pay for a large portion of the workforce.
If implemented, the plan could reshape household budgets, spending habits, and overall economic dynamics, sparking debates about its feasibility, potential benefits, and broader implications for the U.S. economy.
Who Would Benefit From the Tax Plan?
The vast majority of American workers would see an increase in their after-tax income under this proposal. According to U.S. Census Bureau data, approximately 93% of Americans aged 15 and older earn less than $150,000 annually, meaning they would qualify for zero federal income tax.
However, workers would still be responsible for other deductions, including state and local income taxes, which vary by location, as well as Social Security and Medicare taxes, which are deducted separately.
Additionally, other paycheck deductions, such as retirement contributions and health insurance, would continue to impact take-home pay.
How Much Would Take-Home Pay Increase?
The impact of Trump’s tax cut depends on income levels, with higher earners in this bracket seeing the largest dollar-value savings, while lower earners would experience a smaller reduction in taxes as a percentage of their income.
For instance, a worker earning $149,000 per year could save approximately $25,300 annually, which translates to a 17% increase in take-home pay. In contrast, a worker earning $49,000 per year would save around $3,896 annually, representing an 8% increase.
For context, the average annual salary in the U.S. is $63,795, with roughly 9% of this income currently deducted for federal taxes. If this tax were eliminated, a worker in Brooklyn, New York, earning this amount would see a noticeable increase in their paycheck.
What Stays the Same ?
Even if federal income taxes were eliminated, other deductions would still apply. Employees would still pay :
- Social Security tax (6.2% of wages)
- Medicare tax (1.45% of wages)
- State and local income taxes, which vary by location
Some states, such as Texas, Florida, and Tennessee, have no state income tax, meaning residents there would benefit the most from this federal tax elimination. Meanwhile, states with high income tax rates (such as California, New York, and Oregon) would still see significant paycheck deductions.
How to Calculate Your Potential Pay Increase
To determine how much more you would take home under Trump’s plan, you need to consider several factors, including your current salary, the income tax rate in your state, and your existing federal income tax deductions.
Each of these elements influences how much of your paycheck is withheld for taxes. Many online tools, such as SmartAsset’s paycheck calculator, can help estimate the potential changes to your take-home pay based on these variables.
Would This Plan Become Law?
While Trump’s proposal has gained attention, it would require Congressional approval before becoming law. The potential economic impact, government revenue loss, and long-term feasibility would be central to the debate if this tax plan were formally introduced.
Trump’s campaign has positioned this proposal as a major financial relief for middle-class Americans, but its implementation would depend on the political landscape and legislative negotiations.
For now, Americans earning under $150,000 per year can speculate on how much extra money they might take home—but any real policy change would depend on election results and legislative action.
