President Donald Trump’s potential proposal to eliminate taxes for Americans who make under $ 200,000 can have unforeseen consequences. 2 things investors need to know

President Donald Trump’s potential proposal to eliminate taxes for Americans who make under $ 200,000 can have unforeseen consequences. 2 things investors need to know

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  • Trump has published on social media about the potential removal of income taxes for many Americans.

  • Lost tax revenue could worsen the country’s financial status.

  • Trump hopes that tariffs can compensate for lost tax revenue, but this is not clear immediately.

President Donald Trump sailed the idea of ​​eliminating income taxes for Americans, who make less than $ 200,000 a year. In the social post of truth, Trump has said that Tariff Revenue will allow him to continue legislation where “people taxes will be significantly reduced, perhaps even completely eliminated.” No one likes to pay taxes on income and return this income to a wide range of Americans, including lower-income winners, can greatly help their finances and potentially increase their purchasing ability. However, taxes are a bit like going to the dentist: it’s a pain and often uncomfortable, but they are a necessity. The potential proposal to reduce Trump’s tax, though still far from reality, may have unforeseen consequences. Here are two things that investors need to know.

Although more and more complicated, the US government is essentially a big business. Every year there are costs, some of which are mandatory and some discretionary. The government also collects revenue, to a large extent through various forms of taxes, the most tax on personal income income. The government left its finances to go out of control. In 2024, the government operates a $ 1.83 trillion fiscal deficit, which means it spends much more than the collected revenue. This partly stems from the huge $ 36 trillion plus the debt that the country has accumulated, which requires high interest payments every year that decreases in the budget.

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The fiscal situation became so out of control that there were moments of problems in the bond market when yield escalates to anxious levels at a time when investors may have expected to fall. This is probably due to the investors of bonds who have requested more profitability for what they consider to be more at risk for the government. The United States is still successfully issuing trillions of debt, and the dollar is still a worldwide reserve currency, but many experts say the situation is untenable in the long run.

Tax reduction can contribute to difficulties as they reduce government revenue, which can exacerbate the deficit. “Mathematics just doesn’t add,” said Erica York, Vice President of Federal Tax Policy at the Tax Foundation, according to CNN. “It’s not even close.” CNN also reported that income taxes pay about $ 3 trillion revenue to the government, while the US also imports about $ 3 trillion goods each year. This means that tariffs will have to compensate for any dollar lost income tax revenue. According to a Fitch on April 23, the current tariff rate in the United States was only 22.8%and this is extremely high in China, that many, including the Minister of Finance, Scott Bensten, called unstable.

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