President Donald Trump has long praised tariffs as a key to increasing wealth in the United States, and he has been an idealist Golden Age Politics Which preceded the implementation of the modern federal income tax.
Trump claims that among the potential benefits is the ability to replace revenue from federal income taxes with money the United States gets from tariffs — a concept he has promoted since his 2024 presidential campaign, most recently at a Cabinet meeting on Tuesday.
But tariff revenues are not even close to where they should be if federal income taxes were eliminated, and experts say such a plan is not feasible at all.
Here’s a closer look at the facts.
Claim: The United States earns enough revenue from tariffs to eventually eliminate federal income taxes.
Facts: This is not true. Individual income taxes brought in trillions of dollars more than tariffs did last fiscal year, accounting for more than 50% of total U.S. revenues, according to Treasury Department data. Tariffs accounted for only 3.7% of the total. in The first month In the current fiscal year, which began on October 1, individual income taxes accounted for 54% of total revenues. Customs duties constitute 7.75%.
Trump’s proposal would not work regardless, according to experts, given the unreliability of tariff revenues as well as the harmful effects of tariffs on economic growth and their outsized impact on low-income people.
“It’s not possible. It’s not mathematically or economically possible,” said Brandon Depot, senior counsel and policy director at New York University’s Tax Law Center. “Analysts from a range of different viewpoints agree with this conclusion. Even the very large tariffs imposed this year, at their highest levels in the post-war period, have not raised anywhere near as much revenue as an income tax.”
Steve Wamhoff, director of federal policy at the Institute on Taxation and Economic Policy, called the idea “illogical.”
But Trump brought it up twice last week — first During the notes on Thanksgiving at Mar-a-Lago and then again on Tuesday cabinet meeting.
“And I believe that at some point in the not-too-distant future, you won’t even have an income tax to pay. Because the money we’re getting is so great, it’s so enormous, that you won’t even have to pay an income tax,” he said at the meeting, which continued. More than two hours.
in Last fiscal yearTreasury Department data show that revenues from individual income taxes amounted to about $2.66 trillion out of about $5.23 trillion in total revenues. Corporate income taxes added about $452 billion. Customs duties generated approximately $195 billion. That’s a difference of about $2.8 trillion.
the Current fiscal year It is formed in a similar way. Individual income taxes accounted for about $217 billion of total revenue of $404 billion in the first month, with about $15 billion of additional money from corporate taxes. Meanwhile, tariffs generated about $31 billion.
Trump has bragged about additional income from… Investments in the United States By other countries and international companies. But the exact terms of these investments have not yet been fully written down and made public, and some numbers are disputed or involve potentially ambiguous calculations.
The modern federal income tax was created with the ratification of the 16th Amendment in 1913, ending a 43-year era when Trump said the country was wealthier. He has not explicitly presented detailed plans to end the national income tax since regaining control of the White House, and he cannot do so without a congressional action and overturning the federal budget.
“President Trump is set to raise trillions in revenue for the federal government in the coming years through his tariffs — the costs of which will ultimately be paid by foreign exporters who depend on the U.S. economy, the largest and best consumer market in the world,” White House spokesman Khush Desai said. He also pointed to “trillions of dollars in historic investment commitments being made and invested in America” that were fueled by the tariffs.
They are actually importers – American companies – That pays the tariffs. These companies usually pass on their higher costs to their customers in the form of higher prices. However, tariffs can harm foreign countries by making their products more expensive and difficult to sell abroad. Foreign companies may have to cut prices — and sacrifice profits — to offset the tariffs and try to maintain market share in the United States.
Even if the numbers are proportional, replacing revenues from federal income taxes with revenues from tariffs – a Republican talking point since the 1990s – poses many risks. Tariffs, especially at rates needed to compensate for the loss in federal income taxes, could lead to retaliation from other countries and reduced imports. In fact, revenues could start to decline as tariffs rise. There is also a great deal of uncertainty about how much revenue tariffs will actually take, given Trump’s cyclical policy changes.
“We were talking about living in a very different world than the one we live in now,” Wamhoff said. “There was a time when the government’s finances were provided by tariffs. But I think people got around back then by horse and buggy, not by automobile. I mean, that was a completely different time.”
Another fact is now emerging. Trump’s tariffs are the subject of a Supreme Court case and could well be hit down If the judges decide that he does not have the authority to implement it. However, the president will still have plenty of options to continue aggressively taxing imports even if the courts rule against him. For example, he could reuse the tariff powers he deployed in his first term, and he could access other powers, including those dating back to the Great Depression. Many companies — including Costco — are not waiting for a decision from the Supreme Court. Instead, they are filing lawsuits against the Trump administration Claim a refund On the tariffs they paid.
There is also an issue of fairness, experts say, noting that tariffs would shift the tax burden to lower-income households given their tendency to increase the costs of consumer goods. In addition, it lacks the flexibility of income taxes, which can be set at any desired rate, and does not allow for incentives such as charitable donations or child tax credits.
“Inequality is very skewed toward the top,” said Michael Graetz, a professor of tax law at Yale University. “We have more billionaires than ever before. We have more millionaires than ever before. So, it’s a strange time to reduce the tax burden at the top and increase it in the middle. It’s a very effective fundraising proposal for Republicans, and it always has been.”
The White House did not immediately respond to a request for comment.
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