GOBankingRates President: 10 Major Benefits to Americans If Trump Ends Income Taxes
As part of his economic agenda, President Donald Trump has proposed eliminating federal income taxes as a way to make the country richer.
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“We had no income tax,” he said during House GOP Issues Conference on Jan. 27. “The income tax came in 1913. As I said in my speech last week, instead of taxing our citizens to enrich foreign nations, we should be tariffing and taxing foreign nations to enrich our citizens.
“It’s time for the United States to return to the system that made us richer and more powerful than ever before,” he added.
Jeff Bartlett, co-founder and president of GOBankingRates, believes that an end to income taxes would have a number of benefits for the American people.
“The average American household income is about $74,580 in 2022, according to U.S. Census Bureau data,” he said. “If federal income taxes were eliminated, this household could save around $8,950 annually, assuming a 12% effective tax rate.”
Here are the top benefits Bartlett said could come as a result of eliminating federal income taxes.
More Effective Budgeting
Many Americans might not know how much they pay in income taxes between their state and federal taxes. This can make it hard to figure out a suitable budget.
“Ending income taxes would help people actually know what they make so they can budget accordingly,” Bartlett said.
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More Money in Every Paycheck
While some people get excited about receiving a tax refund each year, this is money that could be put to better use if it stayed in your paycheck.
“Ending income taxes would mean not having to prepay part of their paychecks, only to get it back a year later after filing taxes,” Bartlett said.
If that extra money were put in an investment account, for example, it could accumulate interest for the whole year that the government was holding onto it. Not receiving it until the end of the year means missing out on compounding interest.
Less Stress During Tax Season
Federal income taxes would be one less thing you have to worry about when filing taxes each year if Trump gets his way.
“It would remove all the time it takes to file taxes every tax season, including the stress and anxiety,” Bartlett said.
Money Savings During Tax Season
A simpler tax return means you may no longer need to hire a professional to help you with filing.
“It could remove the costs of filing taxes with a tax preparer or accountant,” Bartlett said.
More Money To Put Toward Savings
Many Americans currently have insufficient savings. A recent GOBankingRates survey found that half of Americans have less than $500 in savings, with 39% having $250 or less in savings. If the average American had an extra $8,950 to save, this could make a real difference.
“Americans would have the ability to save more money by using what was pulled out of their paychecks to build their savings accounts,” Bartlett said.
More Money To Invest
That extra money could also be put toward investments.
“More Americans would have the ability to invest in the stock market by using what was previously pulled out of their paychecks for income taxes,” Bartlett said.
More Money To Save for Retirement
In addition, Americans could use the money they were paying in federal income taxes toward building up long-term savings like retirement funds, Bartlett said.
More Money for Debt Repayment
The average American has $104,215 in consumer debt, according to Experian. Unfortunately, debt continues to grow if it’s not repaid in full, so being able to put more money toward debt repayment can drastically help Americans improve their financial standing.
Without income taxes, many Americans would have the ability to pay off more of their debt, Bartlett said.
Boosting the Economy
Not only could eliminating federal income taxes help Americans on an individual level, but it could also improve the U.S. economy.
“Americans would have the ability to help the economy by making needed purchases or home improvements,” Bartlett said.
Increased Wages
Bartlett also believes that eliminating federal income taxes could also have a positive ripple effect on wages.
“Reducing the tax burden can stimulate economic growth, while giving individuals and businesses more capital to invest in goods, services and hiring,” he said. “This could create jobs and generate more economic activity.”
It could also lead to higher wages through more motivation on an individual level.
“Without federal income tax, individuals have more autonomy over their financial situation,” Bartlett continued. “They no longer have to rely on a government program to provide benefits or tax credits. This could lead to people feeling more empowered in their financial decisions. Without taxes diminishing their wages, people may feel more motivated to work longer hours, take on second jobs or enter higher-paying professions. The higher the income, the more rewarding work becomes since no tax will be deducted.”
Editor’s note on political 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: GOBankingRates President: 10 Major Benefits to Americans If Trump Ends Income Taxes
