Lutnick: Trump's goal is to eliminate the income tax for people making less than $150,000 a year

[Tiny]

I believe he said that on both CBS and Fox News during the past week. What do you think, will this happen?

From IRS tax statistics, about $476 billion of the $2098 billion in personal income tax collected in 2022 came from returns reporting less than $150,000 AGI. So about 77% was payed by taxpayers reporting over $150,000 income.

[winn dixie]

Bad idea

[Jacuzzme]

Why the arbitrary 150k number? Why should someone making $149,999 be exempt but the guy making $1 more not be. The goal should be no income tax at all, but if you’re going to do it everyone should pay the same percentage. And none of this employer withholding bullshit, everyone who works is required to write a check for whatever that percentage is and send it in quarterly. People would actually care about how the government is spending their money if they had it and then had to let it go.

This country could use a good tax revolt.

[HDGristle]

I hope they stick with the 150k and the employer withholding

[Tiny]

Originally Posted by Jacuzzme

Why the arbitrary 150k number? Why should someone making $149,999 be exempt but the guy making $1 more not be. The goal should be no income tax at all, but if you’re going to do it everyone should pay the same percentage. And none of this employer withholding bullshit, everyone who works is required to write a check for whatever that percentage is and send it in quarterly. People would actually care about how the government is spending their money if they had it and then had to let it go.

This country could use a good tax revolt.

Good answer

[Tiny]

Originally Posted by HDGristle

I hope they stick with the 150k and the employer withholding

? I thought he was only proposing to stop taxing social security benefits. If the employer contributions get cut out, social security will go bankrupt pretty darn fast.

[Tiny]

Originally Posted by winn dixie

Bad idea

Another good answer

[Texas Contrarian]

Needless to say, this idea is utterly ridiculous.

This brief post by the CRFB offers a quick glance at how large the shortfall would be if this were actually implemented.

https://www.crfb.org/blogs/how-much-...-tariffs-raise

Perhaps Lutnick was simply trying to take a page of of Trump's rhetorical playbook, since during the last weeks of the campaign, Donald was widely panned by a bunch of people in the financial world for pitching more or less the same nonsense to a few guys in a barber shop.

Short video clip:

https://x.com/DavidJHarrisJr/status/1848801504330940674

Of course, he neglected to point out the the US government back in McKinley's day spent only around 2.5% of GDP annually, so we could easily finance our (then tiny) government with some tariffs and excise taxes.

But when you have a tidbit of magical thinking to sell, why let a few facts get in the way?

[Jacky S]

97% of all income taxes are paid by the top 50% of ax payers.

https://taxfoundation.org/data/all/f...tax-data-2024/

That means the bottom 50% are paying virtually nothing.

So any tax elimination of taxes on that bottom 50% is really doesn’t mean much of nothing.

[AllEightUp69]

No. Jacuzzme...You haven't studied real world macro economics in relationship to different tax policies. There's a reason the Eisenhower administration was the most robust economy in our history. It was a highly progressive bracket, no loopholes or tax shelters. Capital gains tax income and to think that we should have some sort of flat tax or no income tax it's so regressive only those in the upper 10% or 1% would even make such a comment. How are you gonna fund the government if you don't do income tax? Sales tax? I mean there's a lot of people on the GOP side talking about that and maybe some dims I don't know they're just as bad but that's a terrible terrible policy. That means a person who is paycheck your paycheck gets taxed on every dollar and you know millionaires and billionaires get taxed on tiny tiny percentages of their Income. A complete tax reform is necessary. Start with the Eisenhower administration brackets and rules on individuals and immediately go to a 40% absolute flat rate no credits loopholes or shelters on corporate income, which is only four points more than I pay by the way and you could actually erase the national debt in between five and nine years. That's the topic that should be brought up in any tax and or debt conversation. Oh and you know what, since we all know they pay those cost by passing out of the consumer, all of a sudden, mom and Pop compete....

[Schwarzer Ritter]

Whether it works or not, the left is against it like the cure for cancer the next four years. WD just demonstrated the insanity.

[Tiny]

Originally Posted by AllEightUp69

No. You haven't studied real world macro economics in relationship to different tax policies. There's a reason the Eisenhower administration was the most robust economy in our history. It was a highly progressive bracket, no loopholes or tax shelters. Capital gains tax income and to think that we should have some sort of flat tax or no income tax it's so regressive only those in the upper 10% or 1% would even make such a comment. How are you gonna fund the government if you don't do income tax? Sales tax? I mean there's a lot of people on the GOP side talking about that and maybe some dims I don't know they're just as bad but that's a terrible terrible policy. That means a person who is paycheck your paycheck gets taxed on every dollar and you know millionaires and billionaires get taxed on tiny tiny percentages of their Income. A complete tax reform is necessary. Start with the Eisenhower administration brackets and rules on individuals and immediately go to a 40% absolute flat rate no credits loopholes or shelters on corporate income, which is only four points more than I pay by the way and you could actually erase the national debt in between five and nine years. That's the topic that should be brought up in any tax and or debt conversation. Oh and you know what, since we all know they pay those cost by passing out of the consumer, all of a sudden, mom and Pop compete....

True, a sales tax is regressive, and comprehensive tax reform is desirable. Otherwise nothing in your post is correct, with two possible exceptions:

You're taxed at a 36% federal rate.

If the minimum income tax were 40%, and if otherwise we used the Eisenhower administration tax brackets, it might be possible to balance the budget in 9 years. Please note that would entail imposing a marginal tax of 56% on couples making more than $40,000 a year, 72% on $88,000 per year, and 84% on $160,000 per year.

https://web.stanford.edu/class/polis...20Brackets.pdf

With no other source of revenues, you'd need a 40% average tax rate on adjusted gross income just to pay the $6.75 trillion current federal expenditures, without paying down the $28 trillion in federal debt held by the the public.

The problem is that people will start making less income when you impose rates at those levels, being 40% to 90%+. There will be loopholes. Btw, contrary to what you say above, there were a lot more of them when the maximum marginal rate was over 90% than after Reagan and a Democratic Congress reformed the tax system and lowered rates.

I'm not sure who you're referring to when you say "You haven't studied real world macro economics in relationship to different tax policies", but you don't know nearly as much about that as Texas Contrarian, and you may not know as much as I do. Texas Contrarian really does have an IQ of 156!

[Precious_b]

Originally Posted by Jacky S

97% of all income taxes are paid by the top 50% of ax payers.

https://taxfoundation.org/data/all/f...tax-data-2024/

That means the bottom 50% are paying virtually nothing.

So any tax elimination of taxes on that bottom 50% is really doesn’t mean much of nothing.

I got to check that out.

[Texas Contrarian]

Originally Posted by Jacky S

97% of all income taxes are paid by the top 50% of ax payers.

https://taxfoundation.org/data/all/f...tax-data-2024/

That means the bottom 50% are paying virtually nothing.

So any tax elimination of taxes on that bottom 50% is really doesn’t mean much of nothing.

True.

However, Lutnick claimed that he proposes to eliminate income taxes not just for the bottom 50% of the income distribution, but for everyone pulling down less than $150K annually.

The median household income in the US is somewhere around $80K. Although those earning below the median don't pay much in income taxes, people making over $80K but less than $150K find themselves in the 22% tax bracket; thus they pay a not insubstantial portion of the total tax.

Consequently, very aggressive tariff rates would be required to cover the shortfall.

The political problem with this idea is that a significant portion of the tax burden would be shifted from solidly middle-class wage earners to the poor.

I suspect that most voters would not be fooled by this sleight-of-hand, and many would be quite unhappy.

Either Lutnick simply shot from the hip and doesn't really think there's any chance of this proposal going anywhere, or he didn't game out any of the likely political consequences arising from such a harebrained idea.

[Lucas McCain]

I thought this article was a nice quick and very simple nontechnical read that reasonably listed a few objective pros and cons... https://finance.yahoo.com/news/trump...130135001.html

1 Major Con IMO Listed:
A Race to the Bottom
Stranger said eliminating federal income taxes would also remove incentives for businesses to hire in low-income neighborhoods or within the United States.

“So, we likely would see a faster shift to companies hiring more lower-priced workers abroad, where possible,” Stranger said. “The lack of [business] tax deductions and incentives would be a race to the bottom for the cheapest workers worldwide. This would cause it to be tougher for people to get hired or get raises when others will work for cheaper.”

1 Major Pro IMO Listed:
More Negotiating Opportunities
Some employers could shift the tax savings from the elimination of income taxes into other forms of compensation, such as bonuses or benefits, instead of raising salaries.

“Employers would have maximum flexibility and creativity in the entire compensation arena,” Miller said. “Job seekers could benefit from creative compensation plans and more freedom to negotiate an attractive job offer on both sides.”

More opportunities for creative negotiation for salary and benefits could especially be helpful for those working in fields or companies where awarding commissions and bonuses is standard practice.

“[Employees] would potentially reap significant benefits in terms of how those commissions or bonuses are structured,” Miller said. “Higher paying jobs would be especially impacted, but even lower wage situations could be improved significantly.”