Former President Donald Trump’s tax reform plan could exempt some 93.2 million Americans, a significant portion of the U.S. electorate, from paying all or part of their income taxes, according to a CNBC analysis of several estimates. There is.
President Trump has launched sweeping policies as part of his economic pitch to voters. Tax reviewincluding income tax relief.
So far, Republican presidential candidates have formally proposed eliminating income taxes on tips and Social Security benefits, along with overtime pay. And last week, in an interview with a sports media site. out kickPresident Trump said he would consider tax exemptions for firefighters, police officers, military personnel and veterans.
These exemptions are part of President Trump’s larger vision to move away from the income tax system and replace it with revenue that he claims will be generated by his aggressive tariff proposals.
“In the old days when we were smart, in the 1890s when we were a smart country, when this country was the richest it’s ever been. We had all the tariffs. We didn’t have income taxes. “President Trump said Friday in New York. He said this at a sit-in with voters infox & friends“Now we have income taxes and we have people dying.”
President Trump has promised to impose a universal 20% tariff on imports from all countries and a 60% tariff on imports from China.
Tax experts reject the idea that customs revenue can offset losses caused by abolishing income tax.
“The math doesn’t work,” Garrett Watson, senior policy analyst at the nonpartisan Tax Foundation, told CNBC.
He said President Trump’s tariffs would be increased by approx. $3.8 trillion In the next 10 years, much less than the approximate period $33 trillion The total estimated revenue generated by income taxes during the same period.
Given that tariffs are paid by U.S. importers and their costs have historically been passed on to consumers, President Trump’s strategy is to replace income tax revenue with a type of invisible sales tax. It seems to be based on a concept.
Tariffs, like sales taxes and other point-of-sale costs, tend to have the greatest impact on low-income consumers and represent a proportionately larger portion of their monthly budgets.
If President Trump’s income tax exemption goes into effect, it could affect tens of millions of taxpayers.
almost 68 million According to the Social Security Administration, Americans receive Social Security benefits every month. And in 2023, 4 million According to estimates from the Yale Budget Institute, workers were employed in tipped jobs.
In March 2023, the U.S. Department of Veterans Affairs 18.6 million Living Veterans. There is 1.3 million According to the Department of Defense, active duty military personnel. and, 800,000 sworn law enforcement officers and roughly 500,000 Paid firefighters.
Taken together, these reforms could result in approximately 93.2 million people receiving at least some, if not all, income tax relief.
This represents about 38% of the 244 million Americans eligible to vote in 2024.
That total doesn’t include the many more people who would get a portion of their income tax exempt if President Trump implements his proposal to eliminate the overtime tax. And that total could change depending on how much overlap there is between the groups of taxpayers President Trump is proposing to cut.
Tax exemptions for tips, overtime pay and Social Security benefits will reduce federal tax revenues by $2 trillion over the next 10 years, according to the Tax Foundation.
“President Trump’s proposed tax exemptions for tips, Social Security benefits, overtime, and potentially workers in certain occupations do not have a strong underlying policy basis, and these proposals are “It follows a trend of promising targeted tax benefits without considering how they will impact the complexities of the tax system,” Watson of the Tax Foundation told CNBC.
The overall plan would result in an estimated decrease in federal tax revenue, given President Trump’s tariff plan and other tax cuts. 3 trillion dollars The Tax Foundation estimates it will take from 2025 to 2034.
Analysts say President Trump’s plan to evade income taxes is a pipe dream.
“Spoiler alert: We do not believe tariffs will replace income taxes,” Evercore analysts wrote in a June note.
Vice President Kamala Harris’ campaign did not immediately respond to CNBC’s request for comment on President Trump’s tax plan.
President Trump’s proposed erosion of the income tax system comes as he also promises to make permanent the 2017 tax cuts that are set to expire in 2025.
But even if Mr. Trump defeats Ms. Harris in the November election, her tax reforms will never see the light of day unless Republicans win a majority in the House of Representatives, where all tax legislation originates. Dew.
Republicans currently control the House by a narrow margin. Control of the House of Representatives will depend on the results of a small number of constituencies in November.