President Donald Trump has doubled down on his proposal to cut or even eliminate federal income taxes, claiming that tariffs will replace the current tax system.
President Donald Trump has doubled down on his proposal to cut or even eliminate federal income taxes, claiming that tariffs will replace the current tax system. In a post on Truth Social, Trump suggested that income taxes for individuals earning less than $200,000 could be “substantially reduced” or entirely wiped out once his tariff policies are fully implemented. This idea comes after he signed an executive order earlier this month imposing a 10% tariff on most imported goods, with countries like China facing tariffs up to 145%.
Trump’s plan involves replacing federal income taxes with revenue from tariffs, similar to the economic model seen during the Gilded Age, when there was no permanent federal income tax. “It will be a BONANZA FOR AMERICA!!! THE EXTERNAL REVENUE SERVICE IS HAPPENING!!!” Trump wrote, adding that his policy would also create jobs. He has suggested that this system would not only reduce income taxes but also benefit the American economy by increasing disposable income, potentially boosting investment.
However, the plan has faced significant skepticism from economists. A study from the Council on Foreign Relations found that the tariff revenue would likely fall short of replacing income taxes for Americans earning less than $150,000. The study estimates that tax revenue from this group totals $576 billion, but tariff revenues would be about $65 billion short of covering this. Even White House trade adviser Peter Navarro’s claim that tariffs could bring in up to $600 billion annually has been questioned by experts like Mark Zandi, chief economist at Moody’s, who believes the actual revenue could range from $100 billion to $200 billion.
Trump has been pushing this tariff-driven tax replacement idea since his 2024 campaign, where he first mentioned eliminating the federal income tax. He has cited the economic prosperity of the U.S. during the pre-income tax era as a model for his proposal. Despite this, recent polling shows that public confidence in his economic policies is waning. A CBS News poll found that 69% of Americans believe the Trump administration has not done enough to lower prices, and Trump’s approval rating on economic matters has dropped to 42%.
The introduction of tariffs has already stirred uncertainty in global markets, with concerns about rising prices for American consumers. This has fueled further criticism of Trump’s protectionist trade policies, with many experts arguing that the economic harm caused by these tariffs could outweigh any potential benefits. Nonetheless, Trump remains steadfast in his belief that tariffs can replace income taxes, making this issue a central part of his economic agenda.
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