Trump Says Tariff Revenue Could Allow Him to Eliminate Income Tax

We recently heard a bold claim from U.S. President Donald J. Trump. He said that revenue from tariffs,  taxes on imported goods, might grow so much that Americans could see their federal income tax cut substantially, perhaps even removed entirely.  It sounds like a dream for many: no income tax, and still a funded government. But is it really possible? We need to dig into the numbers. We will explain what current data and expert analysis tell us, and whether this plan holds up under scrutiny.

What Exactly Did Trump Say?

On November 27, 2025, Trump told U.S. military service members, via a video call, that tariff income could allow “substantially cutting and maybe cutting out completely” federal income tax over the next few years. He argues that thanks to aggressive new tariffs on imports, the U.S. government is collecting large sums of money. That money, he suggests, could replace what is currently raised through taxing wages, salaries, and other income.

How U.S. Federal Income Tax Works

Income tax has long been the backbone of U.S. federal revenue. In recent years, individual (personal) income tax alone has generated roughly half of all federal revenue. Along with payroll taxes and corporate taxes, income tax funds much of government spending, from defense to social programs, infrastructure to public services.

In short, if income tax disappeared, the government would lose a massive portion of its regular funding. That makes any plan to replace it extremely ambitious.

Current Tariff Revenue: Rising, But Still Small

Thanks to Trump’s new tariffs, U.S. customs duties (tariffs) have climbed. For example, in the fiscal year 2024, tariffs raised about US $77 billion nationwide. That amount is much larger than in earlier years, but in the grand scheme, it still represents only around 1.6–2% of total federal revenue. Some recent reports show tariff collections jumped quickly in 2025. Customs duty collections surpassed US$100billion for a full fiscal year for the first time under the new tariff regime.

Still,ariff revenue remains a small piece of the revenue pie compared with income tax.

Can Tariffs Realistically Replace Income Tax?

Here’s where the numbers get tricky, and why many experts are skeptical.

• To replace income tax, tariffs would need to raise money on the scale of trillions of dollars per year. But even under aggressive tariff policies, experts from groups like the Tax Foundation estimate the gains are far smaller.
• One study says that even a 50% tariff on all imports, far higher than current levels, would produce at most about US$780billion per year. That’s far below the roughly US $2–2.3 trillion that income taxes bring in.
• Another problem: higher tariffs raise prices for imports. That tends to reduce how much people buy, which means fewer imports, thus lower tariff income.
• Also, tariffs can slow the overall economy. Less business, fewer wages, and lower consumer spending can reduce other types of government revenue (corporate tax, payroll tax, etc.).

In short, to generate the same revenue as income tax through tariffs alone, the U.S. would need tariffs so high that imports would drop sharply, undermining the revenue source itself.

As noted by the National Taxpayers Union, “replacing the income tax with tariffs is a fantasy.”

What a High‑Tariff Economy Would Look Like

If the government tried to rely heavily on tariffs, the effects could be significant:

• Prices would go up, and imported goods (and goods that use imported materials) would become more expensive. Everyday items, electronics, clothes, furniture, etc., could cost much more.
• Consumers and businesses would feel the pain. Companies that depend on imports (raw materials, parts, machinery) would face higher costs. They may pass those costs to consumers or cut jobs.
• Imports would drop. As global trade slows, tariff revenues, already insufficient, would shrink further.
• Global trade tensions could rise. Trading partners may retaliate with their own tariffs, further shrinking trade volumes.

So even though the ambition is to fund government without income tax, the result might be fewer imports, fewer jobs, and higher consumer prices.

What Trump and Supporters Claim as Benefits

Trump and some of his allies argue for several potential advantages if tariffs replace income tax:

• Boost for domestic manufacturing, encouraging U.S. companies to build products at home instead of importing, “Make‑America-Made” push.
• Reduced dependency on foreign goods.
• Simpler tax structure for Americans, no need to file complicated income tax returns.
• In their view, tariffs are paid by importers, often foreign firms, which shifts the tax burden away from many U.S. workers and families.

On paper, these sound appealing. But real-world economics is rarely that clean.

Major Economic and Practical Challenges

In reality, replacing income tax with tariffs faces many hurdles:

• The revenue gap is huge. As shown above, tariffs simply don’t raise nearly enough money, at least not without massive economic disruption.
• Tariffs are a regressive burden. Unlike income tax (which can be progressive, i.e., richer people pay more), tariffs tend to hit lower- and middle-income families harder because they spend a bigger share of their income on goods.
• Economic slowdown risk. High tariffs may slow trade, raise prices, reduce consumer spending, nd hurt economic growth. That could further shrink government revenue overall.
• Unpredictability. Tariff income depends on import volume, trade partner relations, and exchange rates, all of which can change. That makes it a shaky foundation for stable government budgeting.

Many economists argue that relying solely, or even heavily, on tariffs to fund government operations is unrealistic.

Why History & Global Context Matter

It’s not the first time the idea of tariffs as the main government income has popped up.

• Before 1913,  when the U.S. federal income tax was introduced, tariffs funded much of the government.
• But over time, as government spending grew, tariffs couldn’t keep up. Income tax became more reliable and scalable.
• In modern global economies, trade is complex: supply chains, services, digital goods, not just simple imports. Relying only on tariffs would ignore much of what drives today’s economy.

In other countries, too, tariffs rarely serve as the main source of government revenue. Most rely on a mix of income tax, consumption tax (VAT), payroll tax, corporate tax, and others.

Conclusion

We can see why the idea of eliminating income tax appeals to many. It’s simple, it sounds fair, and it promises more take‑home pay. But when we look at the numbers and economic realities, the plan falls short. Even with record‑high tariff collections under Trump’s policies, tariffs still bring in only a small fraction of what income tax does. The revenue gap is too large. Rebuilding a tax system around tariffs alone would likely cause major disruptions: higher prices, slower trade, and economic pain for consumers and businesses. In the end, this claim, that tariff revenue can replace income tax, remains more of a political promise than a financially viable plan. Unless the U.S. dramatically changes how it trades and spends, tariffs simply don’t generate enough.

For now, income tax stays, and any serious discussion of abolishing it must grapple with the realities of budgets, trade, and human behavior, not just slogans and big promises.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.