Trump: Will have big tax breaks

Trump: Will have big tax breaks

President Donald Trump has expressed his intention to provide significant tax breaks to American taxpayers, suggesting that tariff revenue could potentially replace the federal income tax. However, economists have expressed skepticism about the feasibility of this plan.

In a recent interview with Fox News, Trump stated, "There's a real chance" that tariffs could generate enough revenue to replace income taxes [1]. The idea is not new; tariff revenue historically accounted for a significant portion of government receipts between 1870 and 1913 [2]. However, the current economic landscape is vastly different, with a much larger tax base and a more complex international trade environment.

Economists, such as Erica York from the Tax Foundation, argue that the math simply doesn't work. The current tariff rates, including a universal 10% rate on most countries and a 145% rate on Chinese goods, would struggle to generate enough revenue to fully replace income taxes [1]. Estimates suggest tariffs could bring in as much as $2.4 trillion over the next decade, which is significantly less than the $2 trillion collected from individual income taxes annually [1].

Moreover, tariffs are regressive, meaning they disproportionately affect lower-income households. According to the Tax Foundation, consumers face an overall average effective tariff rate of 28%, the highest since 1901 [1]. This could lead to increased prices on essential goods, making it harder for lower-income individuals to afford basic necessities.

Furthermore, increasing tariffs could lead to a decrease in federal revenue. Higher tariffs would likely drive down imports, reducing the tax base. This could offset any potential gains in tariff revenue [1]. Additionally, a trade war could lead to retaliatory tariffs from trade partners, further shrinking other sources of revenue [1].

In contrast, Secretary of Commerce Howard Lutnick has suggested that Trump's goal with tariffs is to eliminate income taxes for those earning less than $150,000 per year. However, this would also mean eliminating refundable tax credits for many lower-income households, potentially making them worse off [1].

Another idea floated by lawmakers is replacing income taxes with a broader consumption tax on goods and services. Proponents argue that this would end the tax bias against saving and investment, while critics point out that these taxes tend to be regressive and could hurt lower-earning households [1].

In conclusion, while Trump's proposal for big tax breaks is appealing, the idea of replacing income taxes with tariff revenue is not supported by economic data. The current economic landscape and the regressive nature of tariffs suggest that this plan could have unintended consequences, particularly for lower-income households.

References:
[1] https://www.usatoday.com/story/money/2025/04/22/trump-tariffs-replace-income-taxes-economists/83196923007/
[2] https://www.yahoo.com/news/hannity-breaks-trump-1-convenient-211040611.html