Donald Trump Plans to Eliminate Income Tax for Americans, has Shared How He Aims to do It

President Donald Trump, now in his second term, has sparked a national debate by suggesting a radical tax policy shift: eliminating federal income taxes and replacing them with revenue from tariffs. In an interview with Fox Noticias, Trump claimed there’s a “real chance” this plan could work, pointing to the potential for massive income from taxing imports. But economists and budget experts say the numbers don’t add up.

How Much Can Tariffs Actually Generate?

Trump’s argument is based on the idea that tariffs — taxes on goods brought into the U.S. — could raise enough to make income taxes unnecessary. His former advisor, Peter Navarro, estimates that tariffs could bring in $6 trillion over 10 years, or about $600 billion per year. However, the Yale Budget Lab has a more modest projection of $2.4 trillion over the same period.

Even if the higher estimate were accurate, both fall far short of what’s needed. According to the Congressional Budget Office, individual income taxes alone generated over $2 trillion in a single year, far more than tariffs ever could.

Erica York of the Tax Foundation put it plainly: “The math just doesn’t work. You can’t replace income taxes with tariffs — it’s not feasible.”

Why Are Income Taxes So Much More Lucrative?

The main reason is the size of the tax base. In 2022, Americans reported nearly $15 trillion in adjusted gross income. In contrast, the total value of goods imported into the U.S. was only about $3 trillion. That’s a much smaller pool from which to collect revenue.

“If you put tariffs on everything, yes, you get revenue,” said economist Keith Maskus. “But it’s not enough to replace what income taxes bring in.”

Who Pays for Tariffs?

Trump often says that other countries foot the bill for tariffs, but in practice, it’s U.S. businesses that pay them. These companies then pass the added costs on to consumers through higher prices.

So, rather than making foreign nations pay, tariffs tend to act as a hidden tax on American consumers. And if tariffs are too high, they can reduce imports, shrinking the very tax base they rely on for revenue.

“You increase tariffs, you decrease imports,” said Kimberly Clausing from the Peterson Institute. “That means less money coming in.”

Did the U.S. Use Tariffs to Fund Government in the Past?

Trump has cited the pre-1913 era, when the U.S. relied heavily on tariffs before the federal income tax was created. At that time, tariffs made up 40% to 60% of federal revenue.

But back then, government spending was far lower. Programs like Medicare, Social Security, and the modern military didn’t exist. As economist Ernie Tedeschi put it, Americans now expect much more from their government than they did over a century ago.

Could Trump Just Cut Taxes for Lower-Income Americans?

In a less sweeping version of his plan, Trump has proposed eliminating income taxes for people earning under $150,000. Commerce Secretary Howard Lutnick has backed this idea.

While popular, the policy has flaws. Most low-income Americans already pay little or no federal income tax, and many receive refunds due to tax credits. Replacing those credits with tariffs could hurt these families, especially since they spend more of their income on consumer goods, which would become more expensive under higher tariffs.

“You’d be making a lot of these people worse off,” York noted.

What About a National Sales Tax Instead?

Some Republicans have suggested replacing income taxes with a national consumption tax. Though that proposal didn’t gain traction in 2023, the idea remains part of conservative policy proposals like Project 2025.

Economists say consumption taxes could promote saving and investment, but they can also be regressive unless they include rebates or exemptions for lower-income households.

“You’d have to structure it to protect people in the lower and middle classes,” said York.

Can Tariffs Support Other Tax Cuts?

While tariffs can’t fully replace income taxes, they might still contribute to Trump’s broader tax goals. These include extending the 2017 tax cuts and introducing new exemptions for tips, overtime, and Social Security benefits.

But those plans come with a hefty price tag — between $5 trillion and $11.2 trillion over the next decade, according to the Committee for a Responsible Federal Budget. Tariffs could help offset some of those costs, but not all.

Clausing estimates tariffs might replace up to 40% of income tax revenue — and that’s only if they’re so high they risk damaging the economy.

Bottom Line: A Political Idea, Not a Practical One

Trump’s proposal appeals to many with its promise of lower taxes and tougher trade rules. But most experts agree that relying on tariffs to eliminate income taxes just isn’t viable. The revenue shortfall would be massive, and the economic consequences — from higher prices to fewer imports — could hurt the very people the plan aims to help.

In the end, while the idea may fire up political supporters, it’s unlikely to become a reality.