Trump Floats One Weird Idea To Replace The U.S. Income Tax
Former president Donald Trump on Thursday raised the prospect of scrapping the U.S. income tax system and replacing it with something very different: much higher tariffs on imported goods.
Trump has for some time proposed an across-the-board 10% increase in tariffs for imports, but his comments implied far, far heavier trade duties that would likely be passed on to consumers. The campaign of President Joe Biden immediately pounced on the idea as hurting U.S. families.
Trump floated the idea while talking to House Republicans near the U.S. Capitol in what was described as a freewheeling “pep talk” in his first visit to the Capitol campus since the Jan. 6, 2021, insurrection.
“Most intriguing policy idea 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,” said Rep. Thomas Massie (R-Ky.) in a social media post, adding a monocle-clad emoji face at the end.
Citing sources inside the meeting, CNBC also reported Trump had raised the idea of an “all tariff policy.”
The consensus among economists is that tariffs jack up consumer prices because companies would need to charge more for goods and services to make up what they’re paying in tariffs. Economists have also said Trump’s other proposals for new levies would boost inflation in general. Inflation and the price of consumer goods have already become a major talking point ahead of the 2024 election, even as the economy has grown briskly.
Currently, tariffs bring in only a small portion of the $4.4 trillion in revenues the U.S. government brings in every year. According to the Treasury Department, annual Customs duties, which include tariff payments, amounted to $88.3 billion in the 2023 fiscal year. Income taxes, on the other hand, raised more than 20 times as much, $2.2 trillion.
To bring tariff revenues anywhere close to income tax levels would seem to require hefty boosts in tariffs well beyond the 10% Trump initially proposed.
Paul Krugman, the liberal New York Times columnist and winner of the Nobel Prize in economics, gave a quick estimate in a social media post: “I’ll have to write this up in detail, but my first-pass estimate is that this would require an *average* tariff rate of 133 percent.”
A request for comment to the Trump campaign was not immediately answered.
The Biden campaign, which has already hammered at Trump’s 10% across-the-board tariff idea, teed off on the idea, focusing on the regressive nature of it. While the U.S. progressive income tax code means poor families have no or little tax liabilities, tariffs by themselves would likely raise prices without any similar protections.
“The only people who benefit from this regressive, thoughtless policy are Trump’s billionaire donors, who get a windfall at the expense of working class Americans,” said James Singer, spokesperson for the Biden campaign.
“American families get higher costs, Trump’s rich donors get richer,” Singer said.
In one way, Trump’s idea would simply be a return to the past. Prior to the imposition of the income tax in 1913, tariffs were a main source of government revenue. But, according to the Congressional Research Service, they have not accounted for much more than 2% of federal revenues in 70 years.
Trump hinted at that idea by reportedly praising President William McKinley at the meeting Thursday.
Before getting to the White House, McKinley was a member of the House of Representatives and best known for the McKinley Tariff Act of 1890, which boosted tariffs by nearly 50% on imports.
The political blowback from the law was disastrous for McKinley and his fellow Republicans, though. They lost 93 seats in the House in the next election.
