George Kamel - Trump's Plan to Abolish the IRS (What This Means for Your Money)

Episode Date: April 18, 2025

📈 Are you on track with the Baby Steps? Get a free personalized plan. The Trump administration has a bold plan to shake things up (shocking, I know). In today’s video, find out what a proposal to abolish the IRS could mean for the country and for you.     Next Steps: ▪ 🎥 Watch my video on The Truth About America’s Debt Crisis ▪ 📙 Get my new audiobook, Breaking Free From Broke. ▪ 💵 Start your free budget today. Download the EveryDollar app! Connect With Our Sponsors: • 🔒 Get 20% off when you join DeleteMe. • 💸 Learn more about opening a high-yield savings account with Laurel Road. Explore More From Ramsey Network: 🎙️ The Ramsey Show 🍸 Smart Money Happy Hour 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 💡 The Rachel Cruze Show 🪑 Front Row Seat with Ken Coleman 📈 EntreLeadership   Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

Imagine a world where your paycheck is entirely yours, with no income tax whatsoever. Well, that's President Trump's bold proposal. And it sounds incredible, but could it really work? How would we fund the government with no income tax? And what would be the ripple effects? Well, in today's video, we'll dive into this proposal to abolish the IRS and look into what it means for you. But before we jump in, click those like and subscribe buttons and drop a comment below telling me five things you did last week, or I'll consider it your resignation from this channel.

Elon? Yeah. We did it. No, they just unsubscribe. They didn't care. All right. Talk soon. Love you. Bye. What was the last part? Okay, before you start accusing me of getting political, that's not what I'm doing here. And yes, all of this has to do with politics, but this is just a nonpartisan look at Trump's plan for taxes and how they might affect you. Whether you voted for a donkey, an elephant, a brainworm, or Pedro.

Don't forget Pedro. Pascal. And one huge tiny caveat here. We're recording this a few weeks in advance. So don't at me if by the time you watch this, the IRS is already MIA. But as of right now, DJ Trump wants to get rid of the IRS and replace the income tax with what he calls the most beautiful word in the dictionary. Tariffs. Tariff. Would you name a kid tariff? Shout out to all the folks named Tariff out there. They're going through it right now.

Although they might go by Tarif. I might be like, no, no, it's not tariff. I don't know it looks like tariff. It's actually Tarif. It is a family name. But here's the deal. Economists warn that this would be incredibly damaging to economic growth and not really feasible. According to analysts at the Peterson Institute for International Economics,

quote, it is literally impossible for tariffs to fully replace income taxes, end quote. And by the way, there's evidence showing that American firms and American consumers were the hardest hit by Trump's tariffs during his first term, not the foreign exporters. So it would seem that tariffs are not the key to eliminating the income tax, but they might be the key to eliminating America's ability to afford an egg. But there is a more plausible way Trump and the Republicans could eliminate the income tax and abolish the IRS. And that's by replacing the federal income tax with a national state.

sales tax. Essentially, instead of Uncle Sam taking a chunk of your paycheck, the government would get its money from a tax on what you spend. This idea is often referred to as the fair tax, and it's not really that new. Some politicians have been pushing for this since the early 2000s. The latest version is known as the Fair Tax Act of 2025. It's a bill introduced by GOP lawmakers that seeks to abolish the IRS and repeal all personal and corporate income taxes, plus the gift tax, payroll tax, and the death tax, because even dying isn't free in America. That just makes me sad. Now, under this proposed plan, instead of paying, let's say, 22% of your income and taxes,

you'd pay something like a 23% national sales tax when you buy stuff. So you wouldn't get tax when you earn, just when you spend. In theory, you would keep most of your paycheck, and the government would still get its money when you go shopping and buy things like this electric butter spreader, Lincoln Bio. Sounds pretty straightforward, right? But would it really work? Well, it could in theory if the national sales tax were high enough.

If the Fair Tax Act of 2025 is enacted, the national sales tax rate would be 23% as of the 2027 tax year. But that's the tax-inclusive rate. Without going to too much boring detail, that 23% tax rate effectively amounts to about 30%. And one economist has suggested it would actually take a tax rate of at least 44% to maintain the current revenue brought in by the income tax. That's a huge jump, and that's not the only thing that would change.

There would be all kinds of other ripple effects if we got rid of the income tax. Let me show you what I mean. Let's pretend we live in a world where Trump actually pulls this off. That means no more IRS, which means no more filing tax returns, no more audits, and no more worrying about whether you claim the right deductions for the home office that doubles as a guest room slash playroom slash movie room. And yeah, your paycheck is yours, 100%. Loving this hypothetical future so far. But now we've got this massive national sales tax to make up for all the revenue the government lost when they abandoned the income tax. So in theory, your groceries,

gas, and Big Dumb Stanley Cups would cost 30% more. That would mean a $20,000 car just became a $26,000 and your go-to $10 Chick-fil-A meal is now $13. And they still won't let you order your fries well done like they did in the good old days. I guess it wasn't their pleasure after all. Sorry, I don't want soggy fries. I like my boys crispy. Is that a crime in America today to want some crispy boys? Just bitter, disappointment, and almost sadness.

Okay. Now, before you get your taxes in a wad, check this out. People in favor of the fair tax argue that things actually wouldn't cost that much more than they do now. Here's why. If you went to Target today and bought, I don't know, a $10 bag of Sour Patch Kids, you can assume that almost a quarter of the cost of that bag, 22%, is taxes that the business owner is passing onto you, the consumer. Well, under the fair tax, all of the taxes would be eliminated from the tax code, meaning the business owner would no longer need to pass those costs onto you. So in theory, the price would come down, the 23% national sales tax would be added,

and the cost of that bag of kids would still be roughly the same. Maybe a few cents more than it would be today. You okay there, kids? I think blue number two is a little hurt. You're a monster. Now, if you ask me, it's awfully optimistic to assume big corporations are just going to voluntarily pass all their tax savings on to you. And even if they do, things are still likely to cost at least a little more. So now on top of the high prices caused by inflation, tariffs, and whatever's killing the chickens out there, we've got even higher prices. And who do higher prices affect the most? Lower income households. Now the Fair Tax Act suddenly doesn't look quite so Fair. Big sound effects there, guys, big sound effects.

Don't tell me what to do. But to offset the impact of low-income households, the fair tax would include a pre-bate or a prepaid cash rebate to ensure that no American pays federal taxes on essential goods and services up to the poverty level. But even with the pre-bate, critics argue that a sales tax would still disproportionately affect lower-income families. Back when this idea was first getting some traction, economist William G. G. G. G. At the Brookings Institution had this to say about it.

Quote, if households are classified by annual income, the sales tax is sharply regressive. Under the AFT proposal, taxes would rise for households in the bottom 90% of the income distribution, while households in the top 1% would receive an average tax cut of over $75,000. So great news for the billionaires in Trump's cabinet, not so much for the rest of us. And the ripple effects continue. On the other side of the coin, the fair tax might boost savings and investing. Since you only get taxed when you spend, people might be incentivized to save and stash away more money, in their retirement accounts where they could take it out tax-free.

But on the other hand, this could put a damper on consumer spending, because if everything costs more, even if it's just a little bit, people might spend less, which could slow down the economy. And that wouldn't be fun for consumers or business owners. Imagine trying to explain to your loyal customers why their $5-dollar raccoon cross-stitch is now $6. I know those ladies, they're not going to stand for it, mostly because they're sitting, crocheting. But on the plus side, some argue that the fair tax would help prevent tax evasion.

Under the current income tax system, people who work off the books, drug dealers, cash workers, and general tax evaders avoid paying federal taxes. With the fair tax, they would pay taxes when they spend their money, making it harder to avoid taxation. Although, people would likely find ways to avoid the sales tax by buying and selling goods under the table or just trading bread for rare Pokemon cards. A loaf of fresh sour dough for a holographic squirtle, my good fellow. Acting classes are paying off, guys. Just saying, worth every cent of that $400 per cut. class. Hope he kept the receipt. We love a good barter, but there's a chance this could cause more under-the-table deals and evasion. But here's another pro. The Fair Tax would collect more tax revenue from foreign visitors and non-U-S citizens who would pay the same national sales tax as

Americans when they buy goods and services. So all in all, there are pros and cons to the fair tax, and it's hard to know the full impact unless it's actually put into place. But it does seem to be a more viable option than just replacing the income tax with tariffs. Now let's get down to brass tax. That's T-A-C-K-S, not T-A-X. How would abolishing the IRS and replacing the income tax with a national sales tax affect you? I'll break it down based on how much you earn. And while we're talking about earning, let's talk about how much you're earning in a savings account. If you're stashing a lot of cash in a regular old savings account earning dismal interest, it's time to look into a high-yield savings account, like the one offered by Laurel Road, a sponsor of today's

video. With Laurel Road, your account balance earns top-tier APY, so your money is making you more money. Whether you're saving up for a new car, a down payment on a house, a carton of eggs, or a holographic squirtle. Plus, with Laurel Road, there's no minimum balance required to open an account, your deposits are FDIC insured, and there's no hidden fees. You can learn more by going to Laurel Road.com slash George or click the link in the description below. Okay, back to the question. If we move from the federal income tax to a national sales tax, how would all this affect means? Well, it depends on how much you earn and how much you spend. If you're a high earner, you'd love this. More money in your pocket and you can afford the higher sales tax.

If you're middle class, it depends. You'd have more take-home pay, but you'd feel the pinch with every purchase. And you probably wouldn't feel much wealthier. And if your lower income, not great. Essentials would be more expensive and you'd lose out on tax credits like the earned income tax credit. So is abolishing the IRS a good idea? Well, it sounds nice in the sense that it's much simpler than what we have now, but most advanced economies use a mix of different types of taxation, like income tax, corporate tax, sales tax, property tax, to balance efficiency, fairness, and stability. So abolishing the IRS would likely create a whole new set of problems

and we'd need a solid plan in place to actually make this work. So what should you do about it? Well, here's the deal. No matter what happens with the IRS and the income tax, it's always a good idea to be prepared for a financial storm. So how do you do that? I'm going to tell you, and to make it easy on you, I'm going to do it in 60 seconds or less.

So keep up. Number one, pay off your debt, the credit cards, car loans, student loans, all of it. And from now on, avoid debt like bird flu. Because debt is a thief. It's stealing from your income. Number two, you got to save for emergencies. I recommend three to six months of expenses set aside in that high-yield savings account. You need a buffer between you and life. Number three, live on less than you make. You got to make sure you have financial margin so that you don't feel the pinch when it comes to spending. And for what it's worth, every dollar is the best budgeting app out there. I'll drop a link below.

And lastly, keep investing. I recommend setting aside 15% of your income toward retirement as long as you're in a financial position to be investing. You can do that in a company 401k or a Roth IRA. You do that long enough, you're not going to be worried about what's going on in the White House. Boom. How do we do? Still got time to kill. Elon? No, I'm just bored now.

What are you doing? No way. You fired how many people? That's crazy. No, you hang up first. I'm fired. Who saw that coming? I did.

Ultimately, no matter what tax system we have, the best financial plan remains the same. And if you're living paycheck to paycheck and struggling to get ahead, don't count on the government to solve any of your financial problems. The only real path to financial security is the one you create for yourself. And no matter how you voted, here's the bipartisan truth I want you to remember. What happens in your house matters way more than what happens in the White House. So instead of worrying about Washington, focus on your own finances. And while it's fun to daydream about not having to file a tax return, I'm not counting on any of this happening anytime soon. But hey, the way Trump's second term has gone so far, who knows what can happen.

By the time you watch this video, we could all be eating $14 eggs at the Gulf of George Camel. A boy can dream. America got one. Why can't I? Why does America get everything? It's really unfair. If you want a deeper dive on how to build wealth

and how to be prepared no matter what comes your way financially, check out my book Breaking Free from Broke, the ultimate guide to more money and less stress. And if you don't like physical books, that's okay. Check out the audiobook where I read it to you instead. I'll drop a link in the description below. And just for kicks, keep watching this next video

to see what Dave Ramsey said when I asked him if he'd ever consider running for office. Or use the link in the description to watch it next. Thanks for watching. We'll see you next time. Trump, give me Elon. Elon, hear me out. We got George Washington on the dollar bill.

Swap it out with another George. Who's going to know? He's had a good... It's been hundreds of years.