Trump Wants To Eliminate Income Taxes: 4 Other Ways You Would Pay Instead
On its surface, the idea of eliminating income taxes may appeal to many voters this presidential election. Indeed, Donald Trump has been talking about it for some time — it’s even part of his economic plan that he’s revealed to voters as they deal with inflation and higher prices.
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While the idea of not paying taxes on income sounds good to lots of voters, there are many questions about how the United States would make up for that loss of trillions of dollars. Here’s a look at some other ways you would pay instead.
Pay More for Imported Goods
Trump has said he’s considering using a policy of tariffs to eliminate the federal income tax. A tariff is a tax levied on imported goods — a tax meant to level the playing field for domestic companies.
In essence, while you may not pay federal income tax, you’ll likely pay more for things you use every day. Many economists, including those interviewed by Forbes, have said, “Everyday necessities, like clothing, food and household goods, as well as significant purchases like electronics, vehicles and equipment, will immediately increase in price.”
Pay More for Domestic Goods
If your first thought is that you could simply switch to more domestic products instead of imported ones, you might want to reconsider. That’s because of supply and demand.
When the prices for imported goods rise with increased tariffs, more Americans are likely to turn to domestic products. As that demand increases, prices are very likely to follow.
Pay More for Services
Thanks to recent inflation and rising prices, Americans have already seen the trickle-down effects of higher costs. This would likely continue if tariffs were used to make up for the elimination of income taxes.
For instance, think about your favorite restaurant. If the owner is forced to pay more for ingredients because of tariffs, then those higher costs are very likely going to lead to higher menu prices. In addition, as the cost of living increases and the owner is forced to pay higher wages to keep workers, those additional costs also are very likely to lead to you paying more for meals. You can imagine this same scenario at places like salons, spas and more.
Pay More to the State
In addition to Trump talking about eliminating the federal income tax, you may have heard similar discussions at state levels. Some governors have talked about getting rid of income taxes in their states.
Several states already have no income tax. You may be wondering what would happen in your state if income tax is eliminated – and the answer is probably not what you’re hoping to hear. According to Rocket Money, “The answer is that each state is different, but they all offset their lack of income tax with revenue from other types of taxes, such as sales and property taxes.”
Here’s another thing to consider: The overall economies in states with no income tax. Some of these areas see low wages and few job prospects – which might make them unaffordable even with the lack of income tax.
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