The original personal exemption from the income tax was $3,000 in 1913. The equivalent of that in September 2025 is $97,440.
For married filing jointly the personal exemption was $4,000 in 1913. The equivalent of that in September 2025 is $129,920.
This personal exemption, which Trump eliminated in 2018, should be reinstated, and indexed to inflation in this way from here on out, and this income should be entirely federal-tax-free, except of course for Social Security taxes, Medicare taxes, and state and local taxes.
About 83% of individual wage earners made $97k or less in 2023.
That's what actual populist taxation would look like.
Remember, the roughly top 20% would not pay taxes on their first $97k either, so they would be just like everybody else in respect of basic income. If they can't live on that, then neither can we.
Standard deductions and/or itemized deductions for the top 20% are for the debates over the rates they should pay progressively, and should be a moot point for the majority because the majority wouldn't be paying federal taxes anyway.
Corporate income taxes and capital gains taxes muddy these waters, but those taxes were originally placed on Wall Street fat cats at a time when farmers all across this land faced punitive taxes on property which the Wall Streeters did not. Corporate income and capital gains taxes were meant to address that inequity.
The income tax was subsequently added, on the rich obviously, in part because those other taxes didn't really work to address the inequity. But now we have this Rube Goldberg machine of taxation which Trump has merely tweaked again but is not fundamentally reformed.
The fact is that today we still have horrible tax inequity where some income is more equal than others, with much lower tax rates on capital gains held more than one year.
This overwhelmingly benefits the top 20% by wealth, who own 90% of the stock market's value. The owners of this wealth routinely take their income from this source, not from W-2 income, but they are taxed at much lower long term capital gains tax rates of 0%, 15%, and 20%.
Let's compare a person's taxes on next year's income of $97,000 under the Big Ugly Bill's ordinary income tax rates versus the capital gains tax rates.
Starting in 2026, a single filer will get a standard deduction of $16,100. If he makes $97,000 next year in ordinary income, his taxable income will be $80,900 and his federal income tax will be $12,510 ($5,800 plus 22% of the amount over $50,400). The effective tax rate is 12.89% on $97,000.
The same filer without W-2 income but with $97,000 of long term capital gains income instead comes out way ahead. His taxable income is the same because his standard deduction is the same: $80,900. However, on the first $49,450 of taxable income he pays 0% capital gains tax because he held it longer than one year. The remaining $31,450 is taxed at just 15%, which is $4,717.50. The effective tax rate is 4.86%, not 12.89%! That's 62% lower.
If we treated all income from every source the same way and taxed accordingly, the playing field would be more level.
If the people are taxed at ordinary income tax rates, arguably all entities should be. Corporations are people, they tell us, so there should be no story ever again about a profitable company escaping federal taxation in this country.
But Tesla and Meta, for example, paid no tax in 2023. About 25% of companies don't on average.
As for individuals, the data about how many escape taxation is harder to come by, but an estimated 90,000 households making $200k or more in 2022 escaped taxation legally, and about 3,200 individuals making $1 million or more paid no federal tax.
There is nothing populist about a system which treats the income of rich people worthy of a privilege the income of the rest of us is not.