President Donald Trump believes the federal income tax will be repealed in the near future and replaced entirely with tariffs.
Trump made the bold claim that the U.S. would be exempt from income taxes after touting the impact of his trade policies and potential “bonus” stimulus checks at a Cabinet meeting on Tuesday.
“We’re going to give back the tariff refunds because we actually received trillions of dollars,” Trump said.
“In addition, we will be able to reduce our debt,” the president continued. “I believe that at some point in the near future you won’t even have to pay income tax because the money we receive is so great that you won’t have to pay income tax.”
Trump has previously speculated on completely eliminating the federal income tax, which currently accounts for 54% of total government revenue.
According to Reuters, Trump told U.S. service members during a video call on November 27: “I think over the next few years we will make significant cuts, maybe even complete cuts, but we will cut income taxes.”
Economists have raised questions about Trump’s proposal, given the huge discrepancy between income tax and tariff revenue.
According to Treasury Department data, federal government spending exceeded $7 trillion last fiscal year. It has $5.2 trillion in revenue, $2.7 trillion of which comes from income taxes.
The Bipartisan Policy Center estimates that the U.S. government has imposed $258.1 billion in tariffs this year.
Progressive economist Dean Baker, co-founder of the Center for Economic and Policy Research (CEPR), said tariffs alone would not be enough to replace the revenue lost from eliminating the income tax.
Baker wrote in comments for CEPR on November 30 that if the government “relyed on new tariff revenue to replace income taxes that brought in $2.6 trillion (nearly ten times as much), the annual deficit would increase by about $2.3 trillion.”
He added, “This would bring the size of the deficit to about $4 trillion, or about 13% of GDP.”
Treasury Secretary Scott Bessent is not as far along as Trump in predicting the complete elimination of the income tax, but he has claimed that the president’s tariffs could give Americans “income tax relief.”
“The president campaigned on not taxing tips, not taxing Social Security, not taxing overtime and restoring the interest deduction on American-made cars,” Bessant said. “Tariff revenue can be used immediately for tax relief for all of these people.”
Despite concerns about the feasibility of replacing income taxes with tariffs, Trump believes it could happen “in the next two, three, four years.”
“Whether you throw it away, or you just keep it for fun, or you make it very low, much lower than it is now, you don’t have to pay income tax,” Trump said on Tuesday.
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