Trump says he’ll eliminate income taxes. There’s a problem with that | CNN Business

Trump's Income Tax Elimination Plan

President Trump's plan to eliminate income taxes by relying on tariff revenue is economically unrealistic. Experts cite the enormous amount of revenue generated by income taxes ($3 trillion annually) which would necessitate exceedingly high tariffs (potentially over 200%) on all imported goods.

Economic Challenges

Such high tariffs are impractical for several reasons:

• Reduced Demand: Increased prices due to high tariffs would likely lead to decreased consumer demand, undermining the plan's revenue goal.
• Existing Tariffs: The current effective tariff rate in the US (22.8%) is already high, and higher rates could trigger a global recession.
• Congressional Approval: Eliminating federal income tax requires Congressional legislation which currently has little to no support.

Trump's own actions (like the 145% tariff on Chinese goods) show that extremely high tariffs can stifle trade without generating substantial revenue.

Alternative Revenue Sources and Shortcomings

While corporate income taxes could partially offset revenue loss, they only account for a small percentage of total tax revenue (6%). Even if achieved, the plan might worsen conditions for lower- and middle-income households by replacing a progressive tax system with a regressive one.

Though Trump has acknowledged the plan’s ambitious nature and suggested it could be implemented gradually, with tax cuts for low-income earners first, the plan’s fundamental flaws make its complete realization highly unlikely.