January 28, 2025
Think this is a good plan?
During his election campaign, President Donald Trump proposed cutting federal income tax, while experts revealed it could impact your salary.
While speaking at the House GOP Dinner on Jan. 27, Trump suggested that federal income taxes should be “eliminated” while continuing to dance around the idea of issuing tariffs. “Instead of taxing our citizens to enrich foreign nations, we should be tariffing and taxing foreign nations to enrich our citizens,” Trump said, while stating that America was at its richest from 1870 to 1913, when tariffs were a thing.
🚨Trump wants to abolish Federal income tax
“It's time for the United States to return to the system that made us richer and more powerful than ever before… Instead of taxing our citizens to enrich foreign nations, we should be tariffing and taxing foreign nations to enrich… pic.twitter.com/JZSLOCf8Gt
He continued to say that income tax didn’t come about until 1913. The idea sparked controversy on both ends of the aisle. The idea would place a significant change in the country’s economic policy but could also affect Americans’ way of negotiating wages, in addition to increasing disposable income for a number of workers. “This increase in disposable income would have the effect of stimulating the economy, but at the expense of likely increasing real inflation,” Optic Tax CEO Crystal Stranger said.
“Thus, it is likely that, while people would benefit for a short time, soon their wages would be worth less. So, they would not get a long-term benefit in general.”
The proposal resulted in questions being left on the table regarding how the government would fund essential services and programs. Stranger highlighted that eliminating federal income tax would leave fewer incentives for businesses to hire in low-income neighborhoods, which could result in a problem for employers to hire. “So, we likely would see a faster shift to companies hiring more lower-priced workers abroad, where possible,” she 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.”
But it’s not all negative. Financial planner and investment advisor at Miller Investment Management, Rick Miller, said the plan would allow businesses to restructure salary offers or renegotiate compensation packages already provided. “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.”
Democrats openly criticized the proposal as they predicted a national deficit that could lead to a trade war, according to Glute. Over $2 million is collected annually from income taxes. If eliminated, tariffs would have to come in very high in order to match the number.
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