Is The Elimination of The Income Tax Real? Three Takeaways From Trump’s Tax Proposals

Summary

Highlights

• Trump's income tax elimination proposal is likely a negotiating tactic. 🗣️
• Express taxes, such as tariffs, are necessary for government revenue. 💸
• Inflation serves as a hidden tax, affecting asset value and purchasing power. 📉
• Extensions to the Tax Cut and Jobs Act are under consideration, with various provisions set to expire. 📆
• Government spending remains a critical factor in economic stability and tax policy. 📉

Key Takeaways

• Trump's proposal to eliminate income tax seems more like a negotiation strategy rather than a reality. 🎭
• Express taxes, like tariffs, play a crucial role in government revenue and economy management. 💰
• Inflation acts as a hidden tax that impacts citizens' purchasing power, irrespective of income tax changes. 📈
• The potential extension of the Tax Cut and Jobs Act could have significant effects on the economy and individual taxpayers. 📊
• Government spending and national debt heavily influence taxation and economic policies. 💸

Overview

Chapters

• 00:00 - 00:30: Introduction to Trump's Tax Proposal Discussion The chapter introduces a discussion on the potential elimination of the income tax under Trump's administration. The speaker, Toby Mathis, addresses speculation about Trump's proposals, highlighting three major takeaways and potential future directions. The chapter sets the stage for understanding what might actually happen in regards to income tax elimination.
• 00:30 - 01:30: Historical Context of Income Tax and Explanation of Various Taxes The chapter discusses the historical context of income tax, highlighting the period before 1913 when revenue was mostly tariff-based. It emphasizes the importance of understanding where revenue sources originate as part of understanding taxation. Additionally, the chapter addresses the Tax Cut and Jobs Act, focusing on the implications for government spending. The discussion underscores the importance of government spending as a focal point in taxation discussions due to the variety of tax types involved.
• 01:30 - 03:30: Discussion on Express Taxes and Tariffs The chapter discusses the different sources of income tax, not just limited to wages. It breaks down federal taxes on labor, including Social Security and Medicare, which constitute 12.4% for old age, disability, and survivor's insurance, and up to 3.8% for Medicare.
• 03:30 - 06:00: Inflation and Government Spending Concerns The chapter titled 'Inflation and Government Spending Concerns' discusses different types of taxes and their potential increases. It highlights the federal income tax, which can rise from 37% to 39.6% if no action is taken by Congress by year's end. The discussion also emphasizes the impact of various taxes, including income and employment taxes, on the economy.
• 06:00 - 09:00: Focus on Tax Cut and Jobs Act Expiration This chapter discusses the taxation of various types of income, focusing on the differences in tax treatment between portfolio income (such as capital gains, dividends, and royalties) and ordinary income. It touches on the tax brackets for long-term capital gains (0%, 15%, or 20%) versus interest income (0% to 37%) and considerations for employment taxes based on income sources and the nature of earning.
• 09:00 - 10:30: Overview of Trump's Tax Priorities This chapter provides an overview of Donald Trump's tax priorities, particularly in relation to different types of income and taxation. The discussion highlights that while investors may avoid employment taxes, they are still subject to federal income taxes. Various incomes are mentioned, such as rents classified as ordinary income taxed federally but not subject to employment tax. Passive business income, such as that from S Corps or partnerships, also avoids employment tax but is taxed at the federal level. The chapter illustrates the complexity and nuances in tax liabilities depending on the nature of income.
• 10:30 - 13:30: Evaluating Potential Economic Impacts The chapter discusses various forms of taxes including interest, capital gains, dividends, royalties, active income, and rents as significant express taxes. Tariffs are also identified as another key express tax. The text suggests that tariffs were used historically as a negotiation strategy by former President Trump, aimed at reducing other express taxes.
• 13:30 - 15:00: Conclusion and Personal Insights In this concluding chapter, the speaker reflects on the efficacy of tariffs as an economic tool. Despite criticisms that tariffs are ineffective, they argue that historically, tariffs have been implemented successfully. The speaker suggests that while heavy tariffs may not actually be put into practice, the idea highlights the need for addressing hidden taxation through inflation, an issue they have been vocal about for a long time.

Is The Elimination of The Income Tax Real? Three Takeaways From Trump’s Tax Proposals Transcription

• 00:00 - 00:30 Hey, guys. Toby Mathis here. And today we're going to go over this whole is the elimination of the income tax. Actually something that's going to happen. And I'm going to give you three takeaways from the Trump administration proposals. And you could helpfully glean a path going forward and what's really going to happen. So let's dive right in. So last week, Donald Trump said a president Trump said that they were talking about elimination of the income tax and people started running with it. And of course, there's videos out there. We're going to eliminate the income tax.
• 00:30 - 01:00 And what you have to do is listen to what he is saying about where the income tax used to be prior to 1913, when it was mostly tariff based, and where our revenue sources actually come from. So let's start right there, because that's critical to what's actually going on. And then I'll hit two other things. I'm going to talk about the Tax cut and Jobs Act and what's actually going to happen. And we really want to focus that on government spending because that's what you really focus on whenever you're talking about taxation, because there's multiple types.
• 01:00 - 01:30 But let's talk about actual income tax taxation, where it comes from and what we're talking about because there's multiple categories. It's not just wages because we can always say, hey there's an income tax on our wages. Absolutely. Your labor is absolutely taxed both at the federal level and via something called social Security and Medicare. So, you know, whatever you want to call it, it's 12.4% for old age disability and survivor's insurance, and Medicare is 2.9% goes up to 3.8%.
• 01:30 - 02:00 We have all these ins and outs phase out. You know, things that happened. We had the federal income tax, which is 0 to 37%, which will go up to 39.6% if Congress doesn't take action before the end of the year. So it's these things are actually hard hitting different types of taxes. So you have your income taxes, you have your federal income taxes, you have active taxes which which imposes that employment tax on it.
• 02:00 - 02:30 And then you have your things that are like portfolio income, which is your capital gains, your dividends, your royalties, their tax differently, sometimes at lesser levels, like for example, long term capital gains, zero, 15 or 20% interest income, ordinary income 0 to 37%. But maybe you're going to be able to avoid having the employment taxes on it. Depending on on where you earn it, whether you're a bank or not, you have things like royalties, where again, you're
• 02:30 - 03:00 generally speaking, as an investor, we're going to avoid the employment tax, but we're still going to get hit with the federal income tax. You have things like rents, which are going to be ordinary income. It's taxed at our federal level but not subject to the employment taxes. Right. There's passive business income where I'm not working for the money, but maybe it's an active business interest. Maybe it's an S Corp or partnership where I'm not being taxed on employment taxes on it, but I'm still taxed at the federal level on it. Maybe you, you know, you have lots of different things.
• 03:00 - 03:30 So, you know, big ones, the interest capital gains, dividends, royalties, your active income and your rents, those are the big ones that are actually express taxes where you get hit on what's another express type of tax, a tariff. And that's where Trump keeps going. He keeps talking about raising tariffs. And you're going to see him using that as a negotiating ploy because he wants to lower the express taxes.
• 03:30 - 04:00 That's what this is all about guys. And so when he starts saying maybe we're just going to go a heavy tariffs, it's because people say tariffs don't work. You can't use tariffs. They're not yeah we could go 100% tariffs because we have done that in our country's history. Is he actually going to do it. No. These express taxes are needed because if we didn't have them then what are they. What's the other type of tax that's out there. The hidden tax inflation. Been yelling about this for years and years and years.
• 04:00 - 04:30 If you want to see the value of assets go up, what's the M2 money supply during Covid you watch trillions of dollars get printed. You saw inflation go through the roof. It's the same chart. Whether you look at the cost of housing or you look at CPI, the the consumer price index, it follows that M2 money supply. It's because when you print cash and you print more money, you're devaluing the assets out there. The US dollar that are the dollar that's in your pocket gets less valuable
• 04:30 - 05:00 and it goes down over time. And other assets go up over time. That's why you have all the people going out there saying, let's buy gold stuff, because it's a hedge against that, because it's that that's a protection. Bitcoin. Oh, because we want to get away from the US dollar because the government keeps printing it out. They either borrow it or they print it out. In fact, let's listen to our friend Milton Friedman talk about this type of tax. Keep your eye on one thing and one thing only how much government is spending? Because that's the true tax.
• 05:00 - 05:30 Every budget is balanced. There is no such thing as an unbalanced federal budget. You're paying for it. If you're not paying for it in the form of explicit taxes, you're paying for it indirectly in the form of inflation, or in the form of borrowing 100%. That's the secret tax. And when you have dodge attacking, wasteful spending and all these things and they're giving you this hope that somehow we're going to reel in this government, understand the government's already $36 trillion in the hole.
• 05:30 - 06:00 They've been they've been getting themselves deeper and deeper in debt to the tune of what was it, 1.8 last year? There are already 700 billion in debt in the first quarter of 2025, which is actually September through December, because the government's year end is in September. So they're going backwards even with Doge coming in. And let's say they knock out $1 trillion, we're still in the hole every year.
• 06:00 - 06:30 Regardless. We are 1.8. So they shave off a trillion. Then we're only 800 billion in the hole every year. And instead of being 36 trillion, now we're 37 trillion in debt. How does the government cover that? They borrow. They do bonds or they continue to have additional money printed. Either way, it's inflationary, which why, if you've been listening to me, I'm still really concerned about inflation as we go forward. One of the reasons the fed quit lowering their interest rates
• 06:30 - 07:00 because we're going to get we're going to still see so much demand. We have so much demand, for example, for housing. We're 5 million units under built. Well, they're going to throw out illegals and all this stuff. Barely a drop in the bucket, guys. Still, we're not building fast enough to keep up with our population. We have too many people. We had an increase in homelessness last year of 18%. So we're in a struggling situation. But interest rates are high.
• 07:00 - 07:30 Building permits, you're going to watch them. The ramifications of what's occurred in the last year play itself out next year. What we're seeing right now is a lot of multifamily still hitting the market because it was being built three years ago, two years ago. Now it's hitting the market now you're going to see that just continue. And all of a sudden we're going to we're going to end up in a bigger problem. That's what I'm looking at. I'm really focusing in on that inflation. So what is Donald Trump focusing in on tax cut and Jobs Act. Why.
• 07:30 - 08:00 Because I'm just going to use a study. According to the the Hutchins Center, the average tax increase if the tax cut and jobs Act expiring provisions. And I'm going to go over that. There's two types. There's provisions in the tax cut and Jobs Act that are expiring, and there's ones that aren't. The ones that are going to expire will cost the average American on average, $1,900 a year.
• 08:00 - 08:30 It's going to eliminate and I looked at the facts, 6 million jobs. It's going to cause problems if they do not attack that income tax, if they do not cause the express taxes to either extend those tax cutting jobs act or continue to add more. So now you understand why he's talking about eliminating income taxes altogether. That's a marketing ploy, guys. That's a negotiating tactic. I'm going to push it all to tariffs.
• 08:30 - 09:00 He's saying basically Congress get your ass in gear, lower those income taxes, or I'm going to go do something else. We'll get rid of them and we'll just go to tariffs. Right. If you guys can't get this done and quit beating the heck you know what's happening to the American public. And we all know what's happening is our wages have not kept up with inflation. Inflation is going to keep speeding up. We need to have more money in our pocket. And how are we going to do it. The government's going to lower those express taxes.
• 09:00 - 09:30 It doesn't mean that there's no taxes. It means that tariffs are going to have to go up. We'll replace some of it. And the rest of it is Milton Friedman. It's going to be that inflation. Let's actually listen to the white House as they spell this out. So these are the tax priorities of the Trump administration that the president has laid out for members in that meeting today, no tax on tips, which is obviously a very public campaign promise. The president made no tax on seniors, Social Security, no tax on overtime
• 09:30 - 10:00 pay, renewing President Trump's 2017 middle class tax cuts. Again, these are the president's priorities adjusting the salt cap. Eliminate all the special tax breaks for billionaires. Sports team owners close the carried interest tax deduction loophole. Tax cuts for Made in America products. This will be the largest tax cut in history for middle class working Americans. The president is committed to working with Congress to get this done. So what you're hearing quite loudly is not only
• 10:00 - 10:30 are we looking to extend out the Tax Cut and Jobs Act expiring provisions, and let me just give you an example. Your tax rates will go up next year. If Congress doesn't act, it's no longer 37%. At 39.6. It's no longer 22. It's 25. It's no longer like all these different provisions start to go up. Let me see. I can tell you 15, or your 12% goes up to 15, your 22% bracket goes up to 25. Your 24% bracket goes up to 28. 32 is 33, 37 is 39.6.
• 10:30 - 11:00 That's just one example. Your standard deduction, which sits right now at about $30,000 exactly for married filing, jointly goes down to about half of that. That goes away. That's tax cut and Jobs Act expiring provisions. Things like your child tax credit goes down from 2000 to 1000. There's things like your moving expenses, which would actually be a good thing. Right now. Only the military gets to ride them up.
• 11:00 - 11:30 Maybe we get to write those up. we excuse me. Miscellaneous itemized deductions. Comes back with some people say, hey, that's good. Mortgage interest limitation goes up. Some people would say, that's good. They may. There's always going to be room for we say, hey, not all the provisions do we need to extend. So for example, the salt limitation you hear about, that's where if you're itemizing your return, which is only about 20% of the people, but if you're a high income individual, you're not getting to write off the amount of taxes you're paying your state.
• 11:30 - 12:00 It's limited to $10,000. So they're talking about increasing that. So all of this, the extenders on the Tax Cut and Jobs Act is not just provisions that well that that would actually just expressly lower some taxes. In some cases. We're going to eliminate some tax that you're getting hit on because you're not getting a deduction. Some of these things could be really great. The bonus depreciate right now we're sitting I think we're at 40% this year. And then it goes to 20%. Then it's gone.
• 12:00 - 12:30 That is your ability to write things off quicker when it's property that has a useful life of let's say, five, seven, 15 years, as opposed to 27.5 or 39 years, right? So if you can break a property down like if you're a real estate, we can break it into its components. We are able to accelerate that depreciation that's going away. It's phasing out the 20% deduction for businesses on pass through business that goes away. That's gone unless Congress acts.
• 12:30 - 13:00 So what they're saying is not only are we going to extend those, but now we want to eliminate tax on tips, on Social Security, on overtime pay. And by the way, they know there's guys like me out there. I'm a tax attorney right now. What are we going to do. Well, if I have a client and they have their business and right now they're paying themselves X number of dollars a week for 40 hours, right. And I'm going to say how many hours you're actually working. Are you working 60 hours 80 hours.
• 13:00 - 13:30 Like most of the entrepreneurs I know. Then what we're going to do is we're going to lower your base, pay and we're going to pay you overtime because it's not taxable. They're not stupid. They know that guys like me are out here or tip income. We're going to re characterize a bunch of your income. How are you going to do that. There's laws that allow us to do it guys. There's guys like me out there that that can do it. Bonus depreciation example. We know how to take advantage of these things when they give us an incentive. You're going to give me an inch. Great. I'm going to take that full inch right.
• 13:30 - 14:00 You're going to give me a benefit I'm going to take that full benefit. We're going to show you how to how to take advantage of it. They know there's guys like me out there. So when they're saying no tax on these things, they're saying, I'm giving you as a business entrepreneur, as an investor, here is something I am going to give you to utilize to save your clients. Even more money. They're not dumb. renewing all those tax cuts. There's a bunch of them that are of benefit. There's certain ones that aren't coming back, like there's a permanent 21% tax rate on corporations.
• 14:00 - 14:30 That's not even up for discussion. That's permanent elimination of entertainment deduction. People think, oh, that's coming back. Nope. Miscellaneous itemized deductions might come back. Entertainment? Nope. That's toast. There's permanent provisions that are not coming back. And then there's ones that we need to actually have extended, things that he's saying, hey, we want to make sure that sports teams, owners and people getting earned interest, which is taxes, capital gains carried interest deduction, carried interest
• 14:30 - 15:00 that we're going to close that loophole okay. That's going to increase taxes on those folks. Fantastic. Do it right I'm okay with that. And then cutting tax on American products actually lowering I think it's a 28% deduction for domestic. So you're lowering that 21% corporate tax down to about 15% on domestic production. Those are great things that are going to continue to drive the economy so that we can create a little more express tax revenue. That works. If you tax things too high, you get less of it.
• 15:00 - 15:30 So he's saying, let's tax a lot less. Let's let the economy run. But what is the ramification, guys? The takeaway from this is we're going to have inflation absolutely 100%. They could say whatever they want. We're going that's that Milton Friedman right. What you really look at is the amount the government spending the rest of this is just moving chairs around on the deck of the Titanic.
• 15:30 - 16:00 We can increase tariff income. Fantastic. It's going to drop in the bucket compared to express taxes. We lower express taxes, caused the economy to run. What happens when the economy runs? Inflation goes up. Even with high inflation or high interest rates. We're going to see inflation because the government has not cut its spending. Dodge gets in there, starts rooting some of these things out and actually makes it like if they actually have a balanced budget, then I'll eat my words. But I don't think that actually occurs.
• 16:00 - 16:30 Or actually, Milton Friedman wisely says that always balances because they just print more money or they borrow more. But if we actually cut our spending to where we eventually have a surplus, then I'd be shocked. Then I would say, okay, now we don't have inflationary activity, but I don't see that happening again. We're $36 trillion in the hole. Just the interest on that's going to leave a mark. We're going to have to have massive growth in our economy to to offset this. And it's not going to happen overnight.
• 16:30 - 17:00 So crystal ball time. Here's my takeaways. Really easy. What do I think. I think they're going to get the tax cut and Jobs Act extension done before the end of the year. I don't think it's gonna be right away, but I think it will be before the end of the year. I think they're probably going to get a few of these proposals through. It'll be interesting to see whether they can close some of the loopholes up. So guys like me don't completely run rampant with them, right? People do. And it's because they do give you a loophole. Take advantage of it. If it's black and white, take advantage of it.
• 17:00 - 17:30 If it's legal, take advantage of it. It's illegal. Don't write. You're not going to do anything wrong, but you're going to say, hey, my facts, give me this benefit. I'm going to take advantage of it. I don't think you're going to see us eliminate the income tax again. I think that's a marketing thing. That's a that's a that's a, negotiating ploy from the president. I think what he's saying is not only do I want these things extended, but I want a lower income tax on Americans, and we're going to let it fall into those two other brackets,
• 17:30 - 18:00 the two other types of tax, which is inflation and tariffs, some and tariffs. You've already seen a willingness to to go to bat on that. And then the rest of it's going to be inflation. So some people might say no we've got inflation under control. Be prepared guys. Which means real estate investments. Don't just let your stuff sit in cash. As tempting as it is, I know a lot of you guys are just throwing money in savings accounts. yeah. Yeah, like, I'm not saying don't do that, but you're going to have to be measured with it, and you're going to have to take a little bit of risk
• 18:00 - 18:30 if we're going to have an inflationary cycle, which is what I think. I think that that's the category. So if there's three categories express taxes, I have tariffs and I have inflation, I think they're going to lower the express taxes, keep it low. I think you're going to see inflation running. I think you're going to see slightly higher tariffs. If I was a better man that's what I would do. But again nobody actually has a crystal ball. But at least now your eyes are open. And you know what the game that they're playing. Hey if you can like and subscribe, leave your comments down
• 18:30 - 19:00 below of what you think is going to happen. If you disagree, or if you have additional information or you think I'm all wet, feel free to share it. I read their comments and a lot of times like, oh, you know, you're right. Sometimes I'll just say you're right, I miss that. but I always appreciate the feedback. share it with anybody. You think that could benefit from it? and I will see you again later.