Former President Donald Trump is proposing tax reforms that would provide total or partial income tax exemptions to tens of millions of Americans. That’s according to a CNBC analysis of several estimates.
Trump, who’s running for president again, has committed to eliminating income taxes on tips and Social Security benefits, along with overtime pay. He recently expressed willingness to explore tax exemptions for first responders, military personnel and veterans.
These exemptions are part of Trump’s larger effort to move the U.S. away from the income tax system and replace it with tariffs.
In the late 19th century and early 20th century, tariffs were a key part of U.S. economic policy until Congress ratified the federal income tax in February 1913. Tariffs tax products imported into the U.S.
Trump has said he would impose a 20% universal tariff on all imports from all countries and a specific 60% rate for Chinese imports.
However, experts are doubtful tariffs would make up for lost income tax revenue. Tariffs on all U.S. imports would bring in about $3.8 trillion over the next decade, well short of the roughly $33 trillion currently expected to be generated by income taxes alone over the same period.
Tariff costs are generally passed on to consumers. Because they function similarly to sales tax, they affect low-income individuals the most.
Nonetheless, Trump’s income tax exemptions, if enacted, could be vast.
The Social Security Administration says about 68 million Americans receive Social Security benefits every month. About 4 million Americans worked in tipped jobs in 2023, according to Yale University’s Budget Lab.
According to government data, there are 18.6 million veterans, 1.3 million active-duty military personnel, 800,000 sworn law enforcement officers and roughly 500,000 paid firefighters.
In total, roughly 93.2 million Americans could benefit from Trump’s proposed changes, which is roughly 38% of the 244 million Americans eligible to vote in 2024.
This excludes the Americans who might benefit from exemptions on overtime pay, along with any individuals who will receive multiple forms of tax relief.
Some estimates suggest federal tax revenue would decline by $3 trillion from 2025 to 2034.
These estimates assume Trump’s tax overhaul plan passes even if he wins the presidential election.
He’d need a Republican-controlled House of Representatives for that to happen.
As of now, whether his fellow Republicans support the plan is unclear.
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