Today’s high rent costs and student loan payments place a big burden on an entry-level salary. As a result, these two expenses are at the center of much political analysis.
Then young workers get their tax bills, both income and payroll. Yet little attention is paid to the hits they take there.
For many young professionals starting their careers in expensive cities such as New York, Washington, Los Angeles and San Francisco, every paycheck is already stretched to its limit. Saving is difficult. Building wealth is often impossible. Many rely on credit cards simply to stay afloat.
Before those young people have accumulated any meaningful savings, the government is already taking a share of every paycheck. A rarely asked question needs to be: Why
are we taxing them in the first place?
The United States already subsidizes housing, education and health care through an array of programs and tax credits. A simpler alternative deserves consideration: Exempt workers under 25 from federal income and payroll taxes, allowing them to build financial security before the government begins collecting a share of their earnings.
It is a radical idea, but one worth debating.
Income taxes put young people in a financial hole
Young workers contribute through both income and payroll taxes from their very first paychecks, even though they are at the earliest stage of building wealth. Those revenues finance the broad functions of government, including costly retirement and health care commitments for older Americans, while many younger workers struggle simply to afford housing, build savings or start families of their own.
In fiscal year 2025, the total federal income and payroll tax revenue collected was more than $4 trillion. People ages 18 to 25 account for less than 1% of that. It's because a large portion of those young people are still in college, making small salaries from summer internships and part-time work.
Regardless, why should someone just beginning a career pay income and payroll taxes before accumulating meaningful savings, only to qualify for housing assistance, student loan relief or other government programs because of low disposable income?
The government spends vastly more on redistributive policies than eliminating income taxes on those under 25 would cost. For example, the Housing Choice Voucher Program alone was budgeted at about $36 billion in 2025. Under the Biden administration, income-driven student loan repayment was projected to create a $230 billion hole in the federal budget through 2033.
That contradiction reflects a broader flaw in American public policy. We reduce young workers' purchasing power through taxation and then attempt to restore part of it through an expanding array of targeted benefits.
Rather than allowing young adults to accumulate capital and become economically independent, the government taxes their earnings – only to return a portion through subsidies, credits and relief programs. Young Americans become clients of the state before they have the chance to become owners, investors and independent citizens.
Early savings can build wealth over time
The economic case rests on timing. A dollar retained at age 22 has decades to compound through saving and investment. The same dollar returned years later through a tax credit or subsidy arrives after much of that opportunity has already been lost.
For most young workers, additional take-home pay can immediately be directed toward rent, debt repayment, emergency savings or investment without administrative costs, eligibility rules or political considerations.
From a first teenage job to the first few years of one’s post-college career is when lifetime wealth trajectories are often established. Savings accumulated during those years can compound for decades, while financial setbacks incurred early frequently take years to overcome.
Tax policy should recognize that the first years of work are fundamentally different from mid-career earning years.
Congress should consider exempting workers under 25 from federal income and payroll taxes. States and municipalities could adopt similar policies within their own tax systems.
The objective would not be permanent tax relief, but delayed taxation, allowing young workers to accumulate savings before the government begins claiming a share of each paycheck.
Places compete for workers, entrepreneurs and families. A tax system that allows young adults to keep more of what they earn would make it easier to attract talent while encouraging saving, investment and household formation.
Rather than expanding new subsidy programs, policymakers should consider the simpler alternative of taxing less in the first place.
Sam Raus is the David Boaz Resident Writing Fellow at Young Voices. Follow him on X: @SamRaus1
This article originally appeared on USA TODAY: Saving money is hard enough. Stop taxing workers under 25. | Opinion
