During his presidential term, Trump instated various tax cuts, such as lowering individual and business rates, increasing the standard deduction and expanding family tax credits. Many of these provisions were found in the 2017 Tax Cuts and Jobs Act, which is set to expire in 2025.
Learn More: Trump Wants To Eliminate Income Taxes: Here’s What That Would Mean for the Economy and Your Wallet
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It’s important to note that Trump does not claim any correlation to Project 2025. Trump himself has discussed the proposed policies listed in this article. Proposed Trump tax policies will directly impact the average millennial, making it important for you to understand what’s potentially in store.
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Trump’s Income Tax Elimination Plan
Trump’s plans follow the thought that lowering taxes stimulates economic activity and federal revenue, taking on an inverse relationship. For one, Trump plans to cut the corporate tax rate from the current 21% to 20% or even 15%. This might incentivize many small businesses to change entity classifications. Even if the corporate tax rate doesn’t drop below 20%, Trump plans to preserve many of the existing provisions found in the 2017 Tax Cuts and Jobs Act.
Moreover, many of the policies of Trump’s tax elimination plan relate to the middle class. In a recent campaign stop, Trump advocated for eliminating taxes on tips generated by service workers. Data from 2018 shows that 6.1 million taxpayers reported over $38 billion in taxable tip income, equating to around $6,250 in taxes paid per taxpayer.
Trump has also suggested the replacement of personal income taxes with tariff increases. Although it’s still uncertain if payroll taxes would also be eliminated, no personal income tax at the federal level would profoundly impact millennials and the middle class.
Read Next: Should Trump Eliminate Income Taxes? Here’s What Tax Experts Say
The Impact on Millennials’ Wallets
One of the most impactful proposed tax cuts is the elimination of personal income taxes. Here’s a look at some data to see the impact of the possible elimination of income taxes.
The median weekly earnings for full-time workers aged 25 to 34 years old is $1,103. The 35- to 44-year-old age group reports a slightly higher median weekly earnings at $1,247. Taking the average weekly earnings of these two age groups gives us a rate of $1,175 per week for millennials. Multiplying this on an annual scale results in a gross income of $61,100.
Assuming the 2024 standard deduction of $14,600 is taken for a single filer, that leaves a taxable income of $46,500. Using the 2024 tax brackets, you would have a tax liability of $5,348. Trump’s proposed tax plan would eliminate this tax liability, putting over $5,000 back into the average millennial’s pocket! What could you do with an additional $5,000? How about save for a house, take your dream vacation or add to your rainy-day fund?
Solutions To Make Up the Revenue Deficit
The proposed elimination of service provider tips and personal income tax does not come without tradeoffs. Trump plans to subsidize the drop in income tax revenue with increased international import tariffs, specifically a 60% tariff on imports from China. In addition, Trump has suggested increasing tariff revenue by implementing a universal baseline tariff on all U.S. imports.
The impact of these increased tariffs could be price hikes on goods imported from countries outside of the U.S. These price adjustments may be passed down to consumers in the form of increased prices or added taxes. However, the goal of increasing tariffs is to stimulate domestic purchasing. This could create new small business opportunities within the United States and increase the amount of local goods available at a more affordable price.
In addition, many millennials would be saving money each year through the elimination of income taxes. But would the price of imported goods increase more than the amount saved from no personal income tax?
Say that you import about $10,000 worth of goods each year. If prices were to increase by 20%, you would pay an extra $2,000 annually. If you remember the example above, you are saving over $5,000 per year from eliminating personal income tax, resulting in a $3,000 net benefit.
Of course, this is a complicated situation and many factors play a part — so don’t count too much on that $3,000 before it’s in your bank account.
The Bottom Line
These proposed tax adjustments are still in their infancy. If Trump is elected, both parties will tweak and adjust, making it unclear what the future holds for income tax elimination. Nevertheless, there are bound to be some tax adjustments, regardless of which party is in office after November’s election.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: Trump Wants To Eliminate Income Taxes: Here’s How Much the Average Millennial Would Take Home Annually
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