Scrapping Federal Income Taxes: What That $13,614 Gain Really Means for $100K Earners

2026-02-03 08:11:34

President Trump has proposed plans to abolish income tax and dismantle the IRS, a significant tax restructuring that would reshape how Americans file and pay federal taxes. The proposal aims to replace the roughly $3 trillion in annual federal revenue currently collected through income taxes with a system built primarily on tariffs. While the concept of eliminating your annual tax bill sounds appealing on the surface, the full economic picture is far more complex.

The Math Behind Abolishing Income Tax: How Much You’d Actually Keep

If you earn $100,000 annually, you’re currently in the 22% federal tax bracket. However, because the U.S. tax system is progressive, your effective tax rate — the actual percentage you pay after accounting for the graduated bracket structure — comes to approximately 13.61%. This means abolishing income tax would put roughly $13,614 back in your pocket each year.

That calculation assumes federal income tax alone. When you factor in FICA taxes (Social Security and Medicare contributions), the situation becomes more nuanced, especially for self-employed workers versus W-2 employees who have these amounts withheld automatically.

The Catch: Higher Prices Could Wipe Out Your Gains

Here’s where the proposal gets tricky: replacing $3 trillion in lost revenue with tariffs on imports would likely trigger widespread price increases across the economy. According to the nonpartisan Tax Foundation, the average household could face an additional $2,100 in costs during 2025-2026 simply from higher prices on goods.

Consider some specific examples:

Vehicle purchases: Anderson Economic Group estimates American-made cars could cost $2,500 to $5,000 more, while imported models might jump by $20,000 or more
Daily essentials: Tariffs would likely increase prices on clothing, shoes, electronics, appliances, groceries, furniture, and building materials
Long-term impact: These aren’t one-time costs — they compound annually

The troubling math is straightforward: if you’re saving $13,614 from eliminated income taxes but facing $2,100+ in annual tariff-driven price hikes (with major purchases creating additional burden), your actual take-home benefit shrinks considerably.

Constitutional Questions and Implementation Hurdles

While the idea sounds straightforward, the Constitution grants Congress — not the President — the power of taxation under Article 1, Section 8. This means abolishing income taxes would require Congressional action and face significant political and practical obstacles. Navigating this legal framework adds another layer of complexity to the proposal.

The Bottom Line: Paper Gains vs. Real Purchasing Power

Abolishing income tax would theoretically give a $100K earner roughly $13,614 in additional annual income. However, the tariff-based replacement system would simultaneously erode purchasing power through inflation, potentially neutralizing most or all of that tax savings.

The key question isn’t simply “Will I take home more money?” but rather “Will my actual standard of living improve?” The preliminary evidence suggests that for most earners, the math doesn’t work in their favor — at least not under the proposed tariff structure.

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.