Yahoo Finance Trump Wants To Eliminate Income Taxes: Here’s How Much the Average Boomer Would Take Home Annually
Former President Donald Trump — and 2024 presidential candidate — recently said he was considering eliminating income taxes and replacing them with tariffs, as GOBankingRates previously reported.
While experts are split on whether this could be feasible, if this measure were to materialize, it could have enormous impacts on boomers –many of whom have been struggling to keep up with their retirement savings due to a slew of factors — including inflation and high rates.
On one hand, proponents argue that the elimination of income taxes would provide Americans (specifically boomers) with more disposable income, while also simplifying the tax system. Yet, replacing them with tariffs could prove inflationary, putting even higher pressure on everyday prices.
For instance, the Peterson Institute for International Economics noted in a recent analysis that tariffs “would cost a typical household in the middle of the income distribution at least $1,700 in increased taxes each year.”
As Thomas Savidge, economist at the American Institute for Economic Research, said, for boomers who choose to continue working, they will see an increase in their take-home pay if income taxes are eliminated.
He explained, however, that the tariffs will raise the cost of the goods they purchase daily, further straining their budgets and offsetting the potential benefits of that measure.
Against that backdrop, here is what experts had to say in terms of what this could potentially mean for boomers.
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Pros for Boomers
For some boomers, this could be a welcome change, some experts said.
For instance, for many in this cohort — especially those who are retired and not earning substantial income from employment — the elimination of income taxes could translate into more disposable income, making it easier to manage retirement budgets, which are typically fixed, said Steve Sexton, CEO of Sexton Advisory Group.
In fact, many boomers have decided to re-enter the workforce (or unretire) for financial reasons — with one in six retirees considering returning to work, and 55% of retirees went back to work because they needed more money, according to a Paychex survey.
In a potential scenario, using U.S. Bureau of Labor Statistics data, the median weekly earnings for full-time workers aged 55 to 64 is $1,197. Meanwhile, for the 65 and older cohort, it’s $1,154.
In turn, this translates into annual incomes of $62,244 and $60,008, respectively. Now, in 2024, for single taxpayers and married individuals filing separately, the standard deduction is $14,600, according to the Internal Revenue Service (IRS) — which leaves taxable income of $47,644 and $45,408, respectively. Using the 2024 tax brackets, individuals would fall either under the bracket owing $5,426 plus 22% of the amount over $47,150 or the one owing $1,160 plus 12% of the amount over $11,600, according to the IRS.
In other words, the elimination of income taxes would put between $1,160 and more than $5,000 back in boomers’ pockets, which is not negligible.
Other advantages of the removal of income taxes would mean a simpler tax system — reducing both the stress and costs associated with tax preparation, which could be beneficial for retirees, Sexton said.
Finally, Paul Miller, certified public accountant (CPA) and managing partner of Miller & Company, also argued that tariffs could enhance domestic manufacturing and job creation in certain industries and thus offer opportunities for boomers looking to re-enter the workforce.
Find Out: Trump-Era Tax Cuts Are Expiring — How Changes Will Impact Retirees
Cons for Boomers
Now, on the other hand, several experts also argued that this measure could hit boomers particularly hard.
Chris Orestis, president at Retirement Genius, for instance, said replacing income taxes with tariffs would have a profoundly negative impact on people who are retired and living now on “fixed” incomes.
“A tariff by definition is a tax placed on the manufacturer or supplier of a product from another country which is then passed through to the consumer with higher prices,” Orestis said. “For people who rely on retirement savings, pensions and Social Security, a sudden spike in prices will hit them very hard.”
The tradeoff would bring very little comfort to people on a fixed income who watch their purchasing power reduced with little opportunity to offset their situation by generating meaningful income in retirement, he said.
Which Specific Price Hikes Could Affect Boomers and Offset Advantages of No Income Tax?
Dr. Jim Ronan, adjunct professor of political science at Villanova University, said that a key difference if this were to be implemented, is whether boomers are retired or not. For those who are working, they will enjoy more take home pay from the removal of income taxes, he said.
Retired boomers, however, will not experience the increased income positive of the plan but will feel the higher price negative — and in terms of products, higher tariffs will have a far-reaching impact, he said.
To put this in context, a recent AARP survey found that 20% of adults ages 50 and older do not have retirement savings, while 61% “are worried they will not have enough money to support them in retirement.”
What’s more, a startling 37% are “worried about covering basic expenses, such as food and housing,” according to AARP.
And as Fortune previously reported, a big share of boomers’ budgets is on health care, home improvement and entertainment — all sectors which could see price hikes.
Healthcare and health-related products
In terms of specific products, of course healthcare and health-related products would be one that specifically pertains to boomers.
As Sexton explained, many medical supplies and medications are imported and higher tariffs on these goods would lead to increased healthcare and living costs — a significant concern for boomers, who typically require more medical care as they age.
Already, since 2000, “the price of medical care, including services provided as well as insurance, drugs and medical equipment, has increased by 119.2%,” according to Peterson-KFF.
According to NBC News, Americans over the age of 65 spent $7,540 a year on their health.
Consumer and Tech Goods
In addition, consumer goods and technology products which rely heavily on imports — would see price hikes. For instance, these could include electronics, apparel, as well as cars, Sexton said.
This could also impact boomers who rely on technology for communication, entertainment and health monitoring, he said.
Housing prices
Finally, the housing sector could also be affected. Already, an increasing portion of older households are “cost burdened, meaning they spend 30% or more of household income on housing,” according to Harvard University’s Joint Center for Housing Studies.
“Boomers looking to buy or renovate homes might face higher costs if construction materials are tariffed, impacting affordability and retirement planning,” Miller said.
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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