President Donald Trump has said that he’d like to eliminate the Internal Revenue Service and with it income tax. His plan would be to replace the approximately $3 trillion per year that the federal government gets from income taxes with sweeping tariffs.
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One issue with this plan is that tariffs high enough to replace that $3 trillion in federal revenue would ripple into higher prices for consumers — so any tax savings would be undercut by a higher cost of living.
In addition, eliminating federal income taxes is tricky to implement. The power of taxation rests with Congress, according to Article 1, Section 8 of the Constitution. Still, if Trump could make it so and personal federal income tax became a thing of the past, how much extra would you take home if you made $100,000 a year?
Also, learn what a $100,000 salary looks like after current taxes in your state.
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Your New Take Home Pay in 2025
If you make $100,000 a year, you fall into a 22% tax bracket. However, taxes are progressive — you pay 10% on a certain amount, then 12% and 22% on set amounts as they rise. This means your effective tax rate on $100,000 in 2025, according to TaxAct’s Tax Bracket Calculator, is 13.61%.
That equates to $13,614 of extra take home pay.
This doesn’t take into account FICA — Social Security and Medicare — taxes, which changes the equation slightly depending on whether you are a W-2 employee or pay taxes as self-employed.
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You Might Need the Extra Take Home Pay
Before you get too excited about all the extra green in your account, consider the potential implications of Trump’s tariffs. They are basically a tax on the American consumer, since most — if not all — of the import tariffs businesses pay will be passed onto customers: you. So, you might need a lot of that extra take home pay very soon.
For instance, according to the nonpartisan Tax Foundation, the average household will pay $2,100 more for the goods they buy in 2025.
Major purchases could really hammer your extra take-home. Consider that, according to Anderson Economic Group, vehicle prices are likely to rise significantly. The lowest-tariffed American vehicles are expected to be $2,500 to $5,000 more expensive, while some imported models could rise by $20,000.
The bottom line is that under Trump’s sweeping tariffs, most products will come at higher prices, according to a Fox11 report. Everything from clothing, shoes, electronics and appliances to food, furniture and lumber will probably be affected.
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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Sources
TaxAct, Tax Bracket Calculator
Tax Foundation, Trump Reciprocal Tariffs: Details & Analysis
Anderson Economic Group, Tariff Costs for U.S.-Assembled Vehicles Drop Under “Adjusted” Policy
Fox 11, Trump tariffs: Here’s a list of products that will get more expensive
This article originally appeared on GOBankingRates.com: Trump Wants To Eliminate Income Taxes: Here’s How Much Extra You’d Take Home If You Make $100K a Year
