Will Trump end income tax for people earning under $150k?
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Will Trump end income tax for people earning under $150k?
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AI Analysis
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About This Event
Before 2026 If the President or Congress waives or ends income taxes for any year on persons earning less than $150,000 a year before Jan 1, 2027, then the market resolves to Yes. This includes an executive order or action directing income taxes for households earning less than $150,000 be waived (or equivalently, that the income tax is foregone, eliminated, or nullified) for any year, or a bill becoming law which reduces the federal income tax to 0% for those earning less than $150,000 for any
What Prediction Markets Are Forecasting
Kalshi traders give this roughly a 1 in 25 chance, or 4%. That's a strong "probably not" — about as likely as flipping heads five times in a row. The market is saying this proposal is far more campaign slogan than realistic policy.
Why the Market Sees It This Way
Trump floated the idea of ending income taxes on people earning under $150,000 during his 2024 campaign. But the math makes it extremely difficult.
The federal income tax brings in roughly $2.5 trillion each year, about half of all federal revenue. Exempting everyone below $150,000 would remove most of that money, since the vast majority of taxpayers earn less than that threshold. The government would lose somewhere around $2 trillion annually.
To replace that revenue, Trump has talked about tariffs. But tariffs on all imports would need to rise to roughly 70% to fill the gap, which would spike prices on everything from cars to groceries. Most economists think that's politically impossible and economically damaging.
There are also technical hurdles. Even if Trump wanted to do this through executive action, tax law requires Congress to act. And Republicans in Congress, who care about deficits, would likely resist a plan that blows a $2 trillion hole in the budget.
Key Dates and Events to Watch
The market resolves before January 1, 2027. That means any action would need to happen during the next two years. Watch for:
- The 2025 budget reconciliation process, where tax changes typically happen
- Any formal proposal from Treasury Secretary Scott Bessent (if confirmed)
- CBO scoring of revenue impacts, which would show just how expensive this is
- Statements from key Republicans like House Speaker Mike Johnson or Senate Finance Chair Mike Crapo
If serious negotiations start, the odds would jump quickly. But so far, there's no sign of that.
How Reliable Are These Predictions?
Prediction markets have a mixed record on specific policy proposals. They're good at gauging political feasibility — traders understand the procedural and political obstacles. But they can miss sudden shifts, like a president deciding to push something through despite the odds.
The 4% number reflects a real possibility but not a likely one. Think of it as "possible if everything breaks right, but don't hold your breath."
Current Market Outlook
The prediction market on Kalshi prices a Trump-led income tax waiver for earners under $150,000 at just 4%. That is a near-total dismissal of the idea. A 4% probability means the market sees this as a fringe possibility, roughly equivalent to the chance of a random political stunt that never materializes. No other platform trades this contract, so the single data point is Kalshi's 4 cent offer.
Key Factors Driving the Odds
First, the legislative math is brutal. Eliminating income tax for Americans earning under $150,000 would wipe out roughly $1.5 trillion in annual federal revenue, per 2024 IRS data. The Trump tax cuts of 2017 added $1.5 trillion to the deficit over a decade, and Republicans balked at full repeal then. A 2025 Republican Congress, even one friendly to Trump, would not swallow a revenue hole that large without massive spending cuts that are politically toxic.
Second, the mechanism matters. The question allows an executive order, but the IRS cannot legally waive congressionally mandated taxes by fiat. The 16th Amendment and the Internal Revenue Code require legislation to change tax rates. A Trump executive order would be immediately challenged and likely stayed by courts, as happened with DACA and the 2020 payroll tax deferral. The market is pricing in that legal reality.
Third, Trump himself has not proposed this. His 2024 platform focused on extending the 2017 tax cuts and eliminating taxes on tips and Social Security benefits. A blanket $150,000 income tax waiver was never a campaign promise. Markets price what candidates actually say, not what supporters imagine.
What Could Change These Odds
The only realistic path to a higher probability is a surprise legislative push in 2025-2026. If Trump wins and the GOP holds both chambers, a bill could theoretically bundle a high-income tax cut with a low-income exemption. But that would require Republican leadership to prioritize it over extending the 2017 cuts, which expire at the end of 2025. The expiration deadline is the real clock. If Congress spends 2025 fighting over the 2017 extension, there is zero room for a new $1.5 trillion tax break.
A 4% market is efficient here. The upside is capped by fiscal reality and legal constraints. The downside is already near zero. Anyone buying at 4 cents is betting on a legislative miracle that has no visible support in Washington.
AI-generated analysis based on market data. Not financial advice.
Overview
This prediction market asks whether former President Donald Trump, if he returns to office, will end federal income taxes for individuals earning under $150,000 per year before January 1, 2027. The resolution conditions are broad: it includes any executive order, executive action, or legislation that waives, eliminates, or nullifies income tax for that income bracket for any tax year. The $150,000 threshold applies to households, so a married couple earning $140,000 would qualify, but a single filer earning $160,000 would not. The market does not require a permanent repeal; a one-year waiver or suspension would resolve to Yes. The proposal emerged from Trump's campaign rhetoric during the 2024 election cycle. In interviews and rallies, Trump floated the idea of eliminating income taxes entirely and replacing them with tariffs, but he also specifically mentioned cutting taxes for middle-class earners. His campaign never released a detailed policy proposal, but the idea has been discussed by some Republican lawmakers and conservative economists. The market captures whether any such action becomes law or policy before 2027, regardless of who is president or which party controls Congress. Interest in this market spiked after Trump's victory in the 2024 election and his subsequent cabinet appointments. The Republican Party holds a slim majority in the House and a comfortable majority in the Senate for the 2025-2026 Congress. However, the legislative path is complicated by the need for budget reconciliation rules, which require that any tax changes be revenue-neutral over a 10-year window. Eliminating income taxes on roughly the bottom 60% of earners would cost an estimated $1.5 to $2 trillion per year in lost revenue, requiring either massive spending cuts, increases in other taxes, or reliance on tariff revenue that is currently far too small to offset the loss. The market also faces procedural hurdles. Executive orders cannot unilaterally waive taxes; the Constitution gives Congress the power to levy taxes. An executive order directing the IRS to stop collecting income taxes from certain earners would almost certainly face immediate legal challenges and be struck down by courts. The only realistic path is legislation, which would need to pass both chambers and be signed into law. Given the narrow House majority and the fiscal implications, many analysts consider the probability low, but the market allows traders to express their views on Trump's ability to deliver on a major campaign promise.
Historical Context
The federal income tax has been a cornerstone of U.S. revenue since the 16th Amendment was ratified in 1913. The top marginal rate has fluctuated dramatically, from a low of 7% in 1913 to a high of 94% during World War II. The modern income tax system was shaped by the Revenue Act of 1942, which expanded the tax base to cover most working Americans. Since then, every president has adjusted tax rates, but no president has ever eliminated income taxes for any income bracket entirely. The closest precedent is the Tax Reform Act of 1986, which simplified brackets and lowered rates but did not eliminate taxation for any group. The Earned Income Tax Credit (EITC), created in 1975 and expanded in 1993 and 2009, effectively reduces or eliminates income tax liability for low-income workers by providing refundable credits. However, the EITC is a credit, not a waiver of tax liability. In 2020 and 2021, the COVID-19 pandemic spurred temporary tax relief, including stimulus payments and expanded child tax credits, but income taxes themselves remained in place. Trump's own tax record includes the Tax Cuts and Jobs Act of 2017, which lowered the top corporate rate from 35% to 21% and reduced individual rates across brackets. That law did not eliminate income taxes for any group, though it nearly doubled the standard deduction and expanded the child tax credit. The TCJA's individual provisions are set to expire at the end of 2025, which creates a legislative vehicle for new tax changes. Republicans may use the expiration as an opportunity to restructure the tax code, but eliminating taxes for an entire bracket would be a far more dramatic shift than anything in the TCJA.
Why It Matters
Eliminating income taxes for earners under $150,000 would represent the largest tax cut in U.S. history. Roughly 60% of U.S. households earn less than $150,000, so the policy would immediately boost disposable income for about 75 million tax filers. Proponents argue it would stimulate economic growth by increasing consumer spending and reducing the tax burden on the middle class. Critics warn it would blow a massive hole in the federal budget, which relies on income taxes for about 50% of its revenue. Even if the policy is paired with spending cuts or tariff increases, the transition would be disruptive and could increase the national debt. The political consequences are equally significant. A successful elimination of income taxes for most Americans would reshape the electorate's relationship with the federal government. It could reduce public support for government services and make future tax increases politically impossible. Conversely, if the policy fails to materialize or causes economic harm, it could damage Trump's credibility and the Republican Party's reputation for fiscal management. The debate also touches on fundamental questions about the role of government, the fairness of the tax code, and whether tariffs can replace income taxes as a revenue source. Downstream effects would include changes in behavior: lower-income households might face reduced incentives to report income, while high-income earners could face higher taxes to compensate for revenue loss. The policy could also affect state and local tax policies, as many states use federal adjusted gross income as their starting point for state income taxes. Federal programs like Social Security and Medicare, which are funded by payroll taxes, would not be directly affected, but general fund programs like defense, infrastructure, and education would face severe cuts unless alternative revenue is found.
Educational content is AI-generated and sourced from Wikipedia. It should not be considered financial advice.
