On Sunday, U.S. President Donald Trump announced the possibility that, once the tariffs take effect, there could be a reduction or elimination of income taxes for individuals earning less than US$200,000 a year.
“When the tariffs cut in, many people’s income taxes will be substantially reduced, maybe even eliminated entirely. Focus will be on those earning less than $200,000 a year,” the Republican president wrote today on his social media platform, Truth Social.
“Also, massive numbers of jobs are already being created, with new plants and factories currently being built or planned,” he added.
“It will be a bonanza for America!!! The External Revenue Service is happening!!!” the U.S. President concluded.
This week, a coalition of twelve states, led by the attorneys general of Oregon and Arizona, filed a lawsuit seeking to block the tariffs imposed by Trump, arguing that the tariffs are “illegal.”
The lawsuit aims to block the imposition of a 145% tariff on most products from China and a 25% tariff on most products from Canada and Mexico, important trading partners of the plaintiff states.
It also challenges the 10% tariffs on most products imported from the rest of the world, as well as the Trump’s plan to raise tariffs on imports from an additional 46 trading partners starting on July 9.
It can vary. The effective federal income tax rate is around fifteen to twenty percent for most earners. There’s another 7.5 percent or so for federal benefits (Medicare and Social Security). State income taxes vary from zero in a few states to thirteen percent on the highest income bracket in California, but probably average out to five or six percent. Most (or all?) states require employees to cover some burden of their unemployment insurance as well. Some municipalities also have income taxes.
Americans also usually pay taxes on their homes, cars, and sales tax.
And rather than just paying taxes for health care, your employer deducts the cost from your paycheck and gives it directly to a private company, but this is not considered a tax.