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President Trump has proposed abolishing federal income tax and replacing it with tariffs on foreign goods, claiming it would allow American workers to keep 100% of their paychecks. The proposal is based on generating $2.4 trillion in revenue from tariffs, a stark contrast to the approximately $80 billion historically generated from tariffs under normal trade circumstances.
To replace the income tax solely through tariffs, an estimated average tariff rate of about 70% would be required, effectively increasing costs of imported goods significantly, which could lead to reduced consumer purchasing and an economic downturn. Recent tariffs, which rose in FY 2025, generated about $195 billion, but even at this rate, the maximum potential income tax reduction would only be 7.5% to 8%.
Political feasibility is also questionable, with a national debt exceeding $36 trillion and a budget deficit of $1.8 trillion. Many Republicans express concern about adding to the deficit, indicating that the proposal is unlikely to pass in Congress, thus leaving both income taxes intact and rising consumer prices due to tariffs.
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