United States President Donald Trump has repeatedly floated a bold economic vision: that the revenues collected from his sweeping global tariffs could one day make federal income taxes obsolete for Americans. However, a chorus of economic experts and a stark look at the numbers paint a very different picture, labelling the proposal as unworkable and potentially damaging.
The Grand Claim vs The Fiscal Reality
President Trump has championed this idea since his 2024 presidential campaign, reiterating it as recently as a two-hour Cabinet meeting on December 2. During that meeting, he asserted, “I believe that at some point in the not-too-distant future, you won't even have income tax to pay. Because the money we're taking in is so great, it's so enormous, that you're not going to have income tax to pay.” The White House did not immediately respond to queries about these statements.
But can tariffs truly generate enough revenue to replace the federal income tax? The data from the US Treasury Department delivers a clear and resounding no. In the last fiscal year, individual income taxes contributed a colossal $2.66 trillion to the total federal revenue of approximately $5.23 trillion. In contrast, customs duties (tariffs) brought in just $195 billion.
This means income tax accounted for over 50% of all government revenue, while tariffs made up a mere 3.7%. The gap between the two revenue streams is a staggering $2.8 trillion. The trend continues in the current fiscal year. In October alone, individual income taxes comprised 54% ($217 billion) of the $404 billion total revenue, while tariffs generated about $31 billion or 7.75%.
Experts Decry Proposal as 'Nonsensical' and Unfeasible
Economic and tax policy specialists have uniformly dismissed the viability of Trump's proposal. Steve Wamhoff, Federal Policy Director at the Institute on Taxation and Economic Policy, bluntly told the Associated Press that the idea is “nonsensical.” He, along with other analysts, stressed that tariff revenues “don't even come close” to the levels needed.
Brandon DeBot, Senior Attorney Adviser and Policy Director at New York University's Tax Law Centre, emphasised the mathematical impossibility. “Analysts from a range of different perspectives agree with that conclusion,” he said. “Even the very substantial tariffs imposed this year, which are at the highest levels in the postwar era, raise nowhere near the revenue that income tax does.”
Experts point out that beyond the sheer revenue shortfall, tariff income is fundamentally unreliable and unstable. Trump's frequent adjustments to tariff rates and the countries they target create significant uncertainty for long-term revenue planning. Furthermore, the constitutionality of his tariff impositions is pending a verdict from the US Supreme Court. If overturned, it could trigger a wave of refund claims from companies, opening a financial and legal Pandora's box.
Economic Fallout and Impact on Everyday Americans
The adverse consequences of relying heavily on tariffs extend far beyond balance sheets. Firstly, it is American importers who initially pay these tariffs, and they typically pass the increased costs onto consumers, leading to higher prices for goods. While foreign companies may also absorb some impact, the ultimate burden often falls on US households.
Secondly, such a policy would disproportionately hurt lower-income households. Tariffs high enough to even attempt replacing income tax would likely provoke severe retaliation from other economies, curtail imports, and create supply constraints. This combination would drive prices up further, squeezing budgets for those already facing economic strain.
Moreover, tariffs lack the progressive design and flexibility of income taxes. They cannot be tailored to an individual's ability to pay and do not allow for social incentives like deductions for charitable donations or child tax credits. Michael Graetz, a professor of tax law at Yale University, highlighted the inequality concern, noting, “Inequality is very highly skewed toward the top... So it's a strange time to be reducing the tax burden on the top and increasing it on the middle.”
In essence, while President Trump's tariff-centric vision aims for a radical simplification of the tax code, experts warn it is built on an unstable foundation that could undermine economic stability, increase costs for consumers, and place a heavier relative burden on middle and low-income Americans.
