Commerce Secretary Howard Lutnick announced Friday that he has received confirmation from President Donald Trump that the administration plans to eliminate federal income taxes for households earning less than $150,000 a year—if the budget can be successfully balanced.
Trump had previously hinted at eliminating the federal income tax back in January, stating that if his tariff strategy proves effective, the tax could be scrapped altogether. Speaking on the All In podcast, Lutnick recalled being in a car with the president when the idea was brought up again, and said Trump reaffirmed his commitment to the plan.
“I’m in the car with him and I said we’re going to balance the budget,’ Lutnick said. “And I said, ‘But I have one favor to ask you: If we can balance the budget for you, will you agree to waive all income tax for every person who makes less than $150k a year in the United States of America?’ Which, by the way, is about 85% of Americans.
“And the reason you want to work for Donald Trump is he looks at me, he goes, ‘Sure,’” the secretary continued. “You realize, the President of the United States said, ‘If you balance the budget, sure.’ And he’s not lying; he’s not kidding. He’s like, ‘Yeah.’” Lutnick noted that the United States operated without a federal income tax until 1913, relying instead on tariffs to fund the government. President Trump has already imposed tariffs on China and is expected to introduce additional tariffs on Mexico and Canada—the two countries that share land borders with the U.S.
In January, Trump also suggested eliminating income taxes entirely, advocating instead for a tariff-based system—a funding method that historically served as the federal government’s primary revenue source until the early 20th century.
During his campaign, Trump championed proposals to shift away from income-based federal revenue. He called for the elimination of taxes on tips, overtime pay, and Social Security benefits, aligning with his broader vision of tax reform. Speaking to Republican members of Congress at his Doral resort in Miami, Florida, Trump said, “America is going to be very rich again, and it’s going to happen very quickly.” He added: “It’s time for the United States to return to the system that made us richer and more powerful than ever before.”
The president explained that from 1870 to 1913, the federal government was primarily funded by tariffs, and “it was the richest period in the history of the United States.” The Sixteenth Amendment, ratified in 1913, allowed the federal government to impose income taxes. A Supreme Court ruling in 1895 had invalidated a previous law passed by Congress that attempted to do so. It should be noted that the Constitution allows for Congress to impose an income tax but it doesn’t require one.