Trump Promises Major Federal Tax Cuts as Tariff Plans Advance
Federal Income Tax Could Be Replaced with Import Duties, Trump Says
United States President Donald Trump announced that federal income taxes could be “substantially reduced” or even eliminated once his proposed tariff regime is fully implemented.
In an April 27 post on Truth Social, Trump emphasized that individuals earning less than $200,000 annually would be the primary beneficiaries of these cuts.
Vision of an “External Revenue Service”
Trump further elaborated on the idea of funding the federal government through import tariffs instead of traditional taxes collected by the Internal Revenue Service (IRS). Referring to it as the “External Revenue Service,” Trump suggested a significant shift in how the U.S. government could generate revenue in the future.
“We are moving towards funding our nation without burdening our citizens through income taxes,” Trump posted.
Eliminating federal income taxes could have a positive ripple effect across financial markets. Increased disposable income might boost investment in assets, including cryptocurrencies, although experts caution that this outcome is not guaranteed.
Analysts Express Skepticism Over Trump’s Tax and Tariff Strategy
Echoes of the 19th Century Economic Model
Trump first proposed a similar plan during an October 2024 appearance on the Joe Rogan Experience, but at the time, details were sparse. Drawing inspiration from the Gilded Age — a period when the United States thrived without a federal income tax — Trump believes a tariff-funded government could usher in a new era of prosperity.
A study by Dancing Numbers, an accounting automation company, found that Trump’s plan could save the average American about $134,809 over a lifetime. If additional wage-based income taxes were scrapped, the savings could skyrocket to $325,561 per person.
Tariff Rollout Faces Uncertainty Amid Policy Changes
On April 2, Trump signed an executive order imposing sweeping tariffs on all U.S. trading partners. The move included a 10% baseline tariff and additional “reciprocal” rates for nations that impose duties on American goods.
However, the Trump administration has since repeatedly altered its tariff policy, flip-flopping on both the rate structures and implementation timelines.
The uncertainty has rattled financial markets, driving up U.S. bond yields and heightening volatility in the stock market. Financial analysts have criticized the administration’s protectionist trade policies, warning they may hurt capital markets more than they help American industry.
Final Thoughts
While Trump’s vision of a tariff-funded government captures the imagination of some, it remains a controversial proposition facing significant hurdles both economically and politically. As the debate unfolds, Americans and markets alike are bracing for what could be a transformational shift in U.S. fiscal policy.
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