President Trump on Sunday again raised the idea that his tariffs might generate enough revenue to eventually allow income taxes to be eliminated, at least for some people. Spoiler alert: That math doesn’t work.
“We’re going to make a lot of money, and we’re going to cut taxes for the people of this country,” Trump told reporters before flying back from Pope Francis’s funeral in Rome. “It’ll take a little while before we do that, but we’re going to be cutting taxes, and it’s possible we’ll do a complete tax cut, because I think the tariffs will be enough to cut all of the income tax.”
Trump made a similar point in a post on his Truth Social site: “When Tariffs cut in, many people’s Income Taxes will be substantially reduced, maybe even completely eliminated. Focus will be on people making less than $200,000 a year. Also, massive numbers of jobs are already being created, with new plants and factories currently being built or planned. It will be a BONANZA FOR AMERICA!!! THE EXTERNAL REVENUE SERVICE IS HAPPENING!!!”
The tariffs might be happening, but as CNN reports today, to fully replace income taxes they “may need to be set so high that they quadruple the price of everything that comes into the country from abroad.” That would destroy consumer demand, wiping out much of the potential revenue.
The bottom line: Trump keeps saying this, so we’ll keep pointing out that it’s simply not realistic to replace roughly $2.5 trillion in annual revenues from individual income taxes with tariff revenue generated by taxing about $3.3 trillion in imported goods.