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Trump Proposes Replacing Income Tax With Tariffs as Primary Source of Federal Revenue

Published: June 17, 2024
President Donald Trump gives the keynote address at Turning Point Action's "The People's Convention" on June 15, 2024 in Detroit, Michigan. (Image: Bill Pugliano/Getty Images)

On June 13 during a light-hearted conversation with congressional Republicans on Capitol Hill, Donald Trump, the presumptive Republican nominee in this November’s presidential election, floated the idea of eliminating the federal income tax — the country’s primary source of revenue — and replacing it with tariffs on imported goods. 

“Most intriguing policy from the GOP meeting at the Capitol Hill Club this morning: Trump Briefly floated the concept of eliminating the income tax and replacing it with tariffs,” Rep. Thomas Massie (R-Ky.) posted on X.

On June 16, speaking on ABC’s “This Week”, U.S. Treasury Secretary Janet Yellen, talked down the idea saying that it would “make life unaffordable” for Americans, and that “it would require tariffs to be well over 100 percent.” 

However, in the past, there were some years when tariffs generated as much as 95 percent of the federal government’s total revenue, a 2019 report by the Fordham University Journal of Corporate & FInancial Law found.

And, according to comments by conservative columnist Pat Buchanan in 2018, he noted that under a high-tariff system, “From 1869 to 1900, GDP quadrupled. Budget surpluses were run for 27 straight years. The U.S. debt was cut two-thirds to 7 percent of GDP. Commodity prices fell 58 percent. U.S. population doubled, but real wages rose 53 percent. Economic growth averaged 4 percent a year.”


Coming up short

Experts are arguing however that a high-tariff regime, like the one proposed by Trump, would come up short.

“The individual income tax raises about $2 trillion annually on a tax base of personal income of roughly $15 trillion. Customs duties currently raise about $80 billion annually on imports of $3.4 trillion,” Erica York, senior economist and research director at the nonpartisan Tax Foundation, wrote on X, adding in a separate post, “[G]ood luck milking $2 trillion of tax revenue out of $3 trillion of imports.”

Kyle Pomerleau, a senior fellow on tax policy at the conservative leaning American Enterprise Institute, posted to X, “The price of imports would rise, but so would the [U.S. dollar], leading to lower sales and income for exporters.”

Bryan Riley, director of the Free Trade Initiative at the National Taxpayers Union argued that considering the current level of U.S. imports, “it would take a tariff rate of 71 percent” to generate enough revenue.

“However, a tariff rate of 71 percent would dramatically reduce the volume of imports. As a result, the revenue generated would be nowhere close to $2.2 trillion,” Riley added. 

While on the campaign trail, Trump has regularly said that he would target China with high tariffs, going so far as to suggest placing a blanket 60 percent tariff on all Chinese imports.  

Earlier in May Trump said that if he’s elected, he would impose a 60 percent tariff on all goods from mainland China, and an additional 10 percent tariff on all foreign goods, in an attempt to boost domestic production.