Will Donald Trump eliminate taxes for Americans earning less than $200,000 per year? Is it possible, and what would the consequences be?

US president Donald Trump has once again thrown a bold idea, a potential plan to eliminate income taxes for Americans earning under $200,000 per year, as per a report.

He wrote on his social media platform Truth Social, that the revenue from tariffs on imports would allow him to pursue legislation where "people's Income Taxes will be substantially reduced, maybe even completely eliminated," quoted The Motley Fool.

The Big Question: Can Tariffs Replace Income Tax Revenue?

Trump's plan is premised on one assumption: that tariffs might raise enough money to make up for the loss of revenue if income taxes for the majority of Americans were removed. Vice president of federal tax policy at the Tax Foundation, Erica York said, "The math just doesn't add up," as quoted by The Motley Fool.


The Motley Fool also explained that tax cuts could cause more difficulties because they reduce revenue for the government, which could exacerbate the deficit.

Income taxes now generate nearly $3 trillion yearly, nearly half of the federal government's total intake. In comparison, whereas the U.S. imports roughly $3 trillion in goods yearly, the present tariff rate is only 22.8%, far too low to cover the deficit, as per Fitch.

Would Tariffs Damage the Economy?

There's also the issue of how higher tariffs would affect overall economic growth. Trump and his allies say that tariffs can serve to shield American jobs and industries by deterring foreign competition. But in reality, tariffs tend to increase prices, reduce options, and even backfire on the firms they're intended to protect, as per The Motley Fool.

The impact of Trump's latest tariff plan has already starting to appear in the numbers, US GDP fell by 0.3% in the first quarter of 2025 and failed to meet growth expectations of 0.4%, as per the report. According to The Motley Fool, imports, which detract from GDP, rose in the first quarter, as businesses may have been trying to get in front of the looming tariffs that Trump announced in early April.

Fwdbonds' Chief Economist Chris Rupkey said, "There is simply no way for policy advisors to sugarcoat this. Growth has simply vanished," quoted The Motley Fool.

FAQs

Is Trump really proposing to eliminate income taxes for some Americans?
Yes, he’s floated the idea of ending income taxes for people earning under $200,000, saying tariffs could make up the lost revenue.

How would the government make up for the lost tax revenue?
According to Trump, the increased tariffs on imports would replace the money usually collected through income taxes.