Will Trump’s Plan Remove the Promised 75 Million Households from the “Income Tax Rolls”?

July 6th, 2016 by Lapekas Law Staff

Trump’s tax plan is getting more than its share of attention. But let’s face it. Debating Hilary’s plan just isn’t as much fun. It isn’t radical enough to feel like real “reform” and it lacks the excitement attendant to wondering how the government will cover 9.5 trillion in lost tax revenue over the next 10 years. [1]
Let’s dig into Trump’s “Tax Plan”…

His very first explanation as to how he will provide tax relief for middle class Americans will make you wonder whether you or he were sick with the chicken pox in second grade during the Base 10 Number System lesson. Because with so many 0’s that just don’t add up, someone missed the concept.

Trump’s plan states

“If you are single and earn less than $25,000, or married and jointly earn less than $50,000, you will not owe any income tax. That removes nearly 75 million households—over 50 percent—from the income tax rolls. They get a new one page form to send the IRS saying, ‘I win,’ ….” [2]

Yes, the IRS could create a form that says, I win, Signed, John Doe (A “Form 777 Individual Big Winner Declaration,” perhaps?). But as for the assertion that 75 MILLION households would be removed from the “income tax rolls”? That’s where there are BIG questions. The first being, if 75 MILLION households could send in the Form 777 to the IRS, how many households would be left filing a normal tax return (you know, the one that says, I lose. IOU IRS $X. Signed, John Doe)? The answer is…hardly any.

So what do the numbers look like if 75 million households (over 50% of households) are “removed from the income tax rolls”?  Let’s run the numbers…

According to the IRS and the US Census Bureau, in 2013 there were 122,459,000 total households and 147,351,299 federal individual income tax returns for the 2013 tax year filed. [3] That means that there were approximately 1.2 income tax returns filed per household.[4]

Note that a “household” and a “tax return” are not the same economic unit. This misunderstanding is where some of the problem arises in Trump’s promise, though one would hope that a presidential nominee would know the difference.

Of the total number of individual income tax returns filed for 2013, only 94,532,494 were “taxable returns.”[5] There were 52,818,806 returns filed showing no tax.[5] Thus, if there were 1.2 returns/household filed, approximately 78.8 million households filed a 2013 tax return reporting a tax liability.[6]

Let’s go back to Trump’s plan. Remember: Trump wants to remove 75 million households from the income tax rolls. As of the 2013 tax year, there were approximately only 78.8 million households filing a return showing a tax liability. If Trump is held to his promise, only 3.8 million households would file tax returns reporting a tax liability.[7]

So maybe Trump does not really mean that he will remove 75 million households from the income tax rolls, but he instead means that 75 million of the returns that are currently filed will say “I WIN”?

That means, of the 147 million returns that are currently being filed, 75 million would become “Zero-Tax” returns. (Again, for the 2013 tax year, 52.8 million individual income tax returns already reported no tax liability).

Below is a table highlighting the number of 2013 federal individual income tax returns filed by adjusted gross income (AGI) and filing status. The highlighted portions show the number of returns filed reporting $50,000 or less in AGI for married filing jointly returns and $25,000 or less for individual returns. These returns are those which, under Trump’s plan, would purportedly owe no tax. There were 68.9 million returns falling within these thresholds.[8]


2013 Individual Income Tax Returns Filed (by AGI and Filing Status)

Now we are getting closer to Trump’s 75 million number. Under Trump’s plan, 68.8 million tax returns could be filed saying, “I WIN. Signed, John Doe.”

Consider, however, that for 2013, only 33.9 million returns in the above-highlighted brackets reported a tax liability. This is reflected in the table below: [8]


Thus, Trump’s plan would not “remove” 75 million households from the income tax rolls. It could, however, turn approximately 33.9 million returns currently being filed reporting a tax liability into “Zero-Tax Returns”.

In Conclusion…

  Q: Would Trump’s plan remove 75 million households from the income tax rolls?

  A: No. But it *could* remove 28.2 million households.

Approximately 33.9 million returns currently being filed showing tax due would purportedly not show any tax liability under Trump’s plan. This amounts to 28.2 million households (33,874,239 returns ÷ 1.2 returns/household).

[1] http://www.taxpolicycenter.org/publications/analysis-donald-trumps-tax-plan/full
[2] https://www.donaldjtrump.com/positions/tax-reform

[4] 147,351,299 federal income tax returns/ 122,459,000 households=1.2 returns/household
[5] Data compiled from the Table for 2013 for “All Returns: Tax Liability, Tax Credits, and Tax Payments” at https://www.irs.gov/uac/soi-tax-stats-individual-statistical-tables-by-size-of-adjusted-gross-income#_grp8.
[6] 94,532,494 taxable returns / 1.2 returns per household=78,777,78 taxable households
[7] 3,800,000 households * 1.2 returns/household=4,560,000 returns
[7] Data compiled from https://www.irs.gov/uac/soi-tax-stats-individual-statistical-tables-by-size-of-adjusted-gross-income.