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Trump Floats Eliminating Income Tax Using Tariff Revenue: Economists Say The Math Doesn't Work

MarketDash Editorial Team
10 days ago
President Donald Trump suggested the U.S. could substantially cut or even eliminate federal income tax over the next few years, funded by tariff revenues. Tax experts quickly pointed out a major problem: tariff revenue is nowhere near large enough to replace income tax collections.

A Bold Tax Policy Vision

President Donald Trump is floating an ambitious reshaping of how Americans pay for their government. In a Thanksgiving video call with U.S. military service members, he suggested the country could "substantially" cut or even "completely" eliminate the federal income tax within the next couple of years. The funding source? Tariff revenues, which Trump said would be "so large" they could replace income tax collections entirely.

Trump didn't provide specifics or a detailed timeline for this massive policy shift, but he made clear that tariff money would do the heavy lifting. He also mentioned using some tariff revenue to provide dividends to American citizens, though he added that "much of it is going to go towards reducing debt."

Targeting Middle And Lower Earners

This isn't the first time Trump has floated the idea. Back in April, he posted on Truth Social that "When Tariffs cut in, many people's Income Taxes will be substantially reduced, maybe even completely eliminated." He specified that the "focus will be on people making less than $200,000 a year," calling the proposal a "bonanza for America."

The pitch is straightforward: replace income taxes with tariff collections, giving relief to low and middle-income taxpayers while the government collects revenue from imported goods instead.

Economists Pour Cold Water On The Numbers

Tax experts aren't buying it. Alex Durante of the Tax Foundation bluntly told reporters that the numbers don't add up, calling it "not a realistic proposal."

Economist Kimberly Clausing of the Peterson Institute laid out the fundamental math problem: "The tariff tax base is a lot smaller than the income tax base." She highlighted a stark reality—the U.S. imported $3.1 trillion worth of goods in 2023, while the income tax was levied on more than $20 trillion in income. Even with aggressive tariffs, you simply can't squeeze enough revenue from imports to replace what the government collects from income taxes.

The gap between tariff potential and income tax collections represents a structural challenge that no amount of tariff rate increases could reasonably bridge. It's the difference between taxing a fraction of international trade versus taxing the entire domestic income base.

Whether this remains campaign-style rhetoric or evolves into actual policy proposals remains to be seen, but for now, the economic consensus is clear: tariffs alone can't fund the federal government while eliminating income taxes.

Back to News

Trump Floats Eliminating Income Tax Using Tariff Revenue: Economists Say The Math Doesn't Work

MarketDash Editorial Team
10 days ago
President Donald Trump suggested the U.S. could substantially cut or even eliminate federal income tax over the next few years, funded by tariff revenues. Tax experts quickly pointed out a major problem: tariff revenue is nowhere near large enough to replace income tax collections.

A Bold Tax Policy Vision

President Donald Trump is floating an ambitious reshaping of how Americans pay for their government. In a Thanksgiving video call with U.S. military service members, he suggested the country could "substantially" cut or even "completely" eliminate the federal income tax within the next couple of years. The funding source? Tariff revenues, which Trump said would be "so large" they could replace income tax collections entirely.

Trump didn't provide specifics or a detailed timeline for this massive policy shift, but he made clear that tariff money would do the heavy lifting. He also mentioned using some tariff revenue to provide dividends to American citizens, though he added that "much of it is going to go towards reducing debt."

Targeting Middle And Lower Earners

This isn't the first time Trump has floated the idea. Back in April, he posted on Truth Social that "When Tariffs cut in, many people's Income Taxes will be substantially reduced, maybe even completely eliminated." He specified that the "focus will be on people making less than $200,000 a year," calling the proposal a "bonanza for America."

The pitch is straightforward: replace income taxes with tariff collections, giving relief to low and middle-income taxpayers while the government collects revenue from imported goods instead.

Economists Pour Cold Water On The Numbers

Tax experts aren't buying it. Alex Durante of the Tax Foundation bluntly told reporters that the numbers don't add up, calling it "not a realistic proposal."

Economist Kimberly Clausing of the Peterson Institute laid out the fundamental math problem: "The tariff tax base is a lot smaller than the income tax base." She highlighted a stark reality—the U.S. imported $3.1 trillion worth of goods in 2023, while the income tax was levied on more than $20 trillion in income. Even with aggressive tariffs, you simply can't squeeze enough revenue from imports to replace what the government collects from income taxes.

The gap between tariff potential and income tax collections represents a structural challenge that no amount of tariff rate increases could reasonably bridge. It's the difference between taxing a fraction of international trade versus taxing the entire domestic income base.

Whether this remains campaign-style rhetoric or evolves into actual policy proposals remains to be seen, but for now, the economic consensus is clear: tariffs alone can't fund the federal government while eliminating income taxes.