Trump proposes ending the federal income tax. Here's what that would mean

CNN-

After promising to eliminate taxes on tips, Social Security benefits and overtime, former President Donald Trump is taking aim at the biggest levy of all, the federal income tax.

As Election Day approaches, Trump spoke about his interest in ending the federal income tax in two high-profile interviews this week, recalling the late 19th century, when the United States relied on tariffs customs authorities to finance federal spending. The former president pledged to broadly impose tariffs, arguing they could generate billions of dollars in revenue.

Speaking to barbers in the Bronx, New York, in a segment that aired Monday on Fox News, Trump said, “There is a way, if what I'm planning comes to pass.”

When we were a smart country, in the 1890s, the country was relatively the richest it had ever been. There were all the prices. There was no income tax, Trump said after a barber asked him if it would be possible to ditch the federal income tax. Now we have income taxes and people dying. They pay taxes and they don't have the money to pay them.

A few days later, podcaster Joe Rogan asked Trump if he was seriously considering replacing the federal income tax with tariffs.

Yeah, sure, why not? Trump said during his interview Friday on The Joe Rogan Experience.

Trump, who also floated the idea of ​​ending the federal income tax in June, did not say whether he would eliminate federal corporate income and payroll taxes or just the income tax. personal income, which brings in about half of the nearly $5 trillion in revenue the federal government collects.

On the other hand, customs duties represent approximately 2% of federal revenues.

Eliminating the income tax could be an ambitious future goal, Jason Miller, a senior adviser to the Trump campaign, told reporters Saturday, noting that the former president's top priorities would be to extend the expiring provisions of his Tax Cuts and Jobs Act of 2017 and implement the targeted tax cuts Trump announced. deployed.

Massive tariffs are the cornerstone of Trump's economic agenda for a second term, if elected. He called for blanket tariffs of 10 or 20 percent on all imports into the United States, as well as a tariff of more than 60 percent on all Chinese imports.

The former president says tariffs, which he imposed to a lesser extent during his first term, would help finance his costly array of proposals. He has repeatedly denied that U.S. consumers would bear the brunt of the tariffs, falsely claiming that foreign countries would pay the taxes.

Many federal budget experts, however, have refuted the idea that tariffs could replace income taxes.

It's an absurd idea for many reasons, the biggest being that it's mathematically impossible to replace income taxes with tariffs, Erica York, senior economist and research director at the Right-wing Tax Foundation. Imports represent a much smaller tax base than taxable income, and there is no way to raise enough revenue from import taxation to fully replace income taxation. A trade like this would raise taxes on working-class taxpayers and result in harmful retaliation against U.S. exports.

An increase in tariffs would likely cause Americans to buy fewer imported goods, negating at least some of the hoped-for revenue, Brian Riedl, a senior fellow at the right-leaning Manhattan Institute, told CNN.

On its face, fully replacing the $2.4 trillion in income taxes would require a 75% tariff on the Americas' $3.2 trillion in annual imports, he said. However, even this assumes, unrealistically, that Americans continue to buy the same imports at almost double the price.

Additionally, Trump had to spend some of the revenue generated by the tariffs he imposed during his first term to bail out industries, including agriculture, that were hurt by retaliatory measures by others country, Riedl said.

So even the new revenue from Trump's next round of tariffs might not generate much net budget savings, he continued.

Even without eliminating the federal income tax, Trump's economic plan would increase the national debt by $7.5 trillion over a decade, according to a recent analysis by the Committee for a Responsible Federal Budget. The nonpartisan watchdog group estimates its tariff proposal would raise $2.7 trillion over 10 years.

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