President Donald Trump is yet again pitching a radical idea: replacing the federal income tax with revenue from tariffs. In a recent interview, Trump said there is "a chance" that tariffs alone could create enough money to abolish the need for personal income taxes.
The idea, however, is drawing widespread criticism from economists.
What Happened: "There is a chance that the money from tariffs could be so great that it would replace the income tax," Trump said during the April 15 Fox News interview.
The comment comes on the heels of his recent decision to levy a universal 10% tariff on imports from most countries and increase duties on Chinese goods to as much as 145%.
See Also: Trump Tariffs Drive Companies To Stash Imports In Tax-Free Foreign Trade Zones
Why It Matters: According to multiple experts, the numbers do not add up. "It's not a realistic proposal," said Alex Durante of the Tax Foundation to CNBC.
The organization estimates that a 10% universal tariff would raise $2.2 trillion over ten years. But that figure comes with trade-offs: the same policy would shrink U.S. GDP by 0.4%, deflating wider economic growth.
Kimberly Clausing of the Peterson Institute echoed similar concerns. "The tariff tax base is a lot smaller than the income tax base," she said, highlighting that the U.S. imported $3.1 trillion in goods in 2023, while income tax was levied on more than $20 trillion in income.
Even optimistic tariff estimations fall short in a major way. The IRS has already collected $1.14 trillion in income taxes this fiscal year. "If you get to $100 billion to $200 billion [in tariff revenue], you'll be pretty lucky," said Mark Zandi, chief economist at Moody's.
Trump's tariff vision comes at a volatile moment in global trade. The International Monetary Fund has downgraded the U.S. growth forecast for 2025 from 2.7% to 1.8%, mentioning ongoing trade tensions as the cause.
Read Next:
- Trump Pledges ‘Substantial’ Cut In China Tariffs, But Refuses To Make It ‘Zero:’ ‘If They Don’t Make A Deal, We Will Set The Deal’
Photo courtesy: noamgalai/Shutterstock
