President Donald Trump has again suggested a major overhaul of the federal tax system, saying that surging tariff revenues could be used to deliver major income tax relief for low- and middle-income Americans.
Plans To Cut – Or Even Eliminate – Income Tax
During a Thanksgiving video call with U.S. military service members, Trump said that “over the next couple of years” the United States could “substantially” reduce, or even “completely” eliminate, the federal income tax. He did not provide a detailed roadmap or specific timeline for how such a change would be implemented.
See Also: Top Economist Says Trump’s Tariff Rollbacks Are A ‘Remarkable Admission’ That His Policies Raised Prices
Trump argued that tariff collections would be “so large” that they could replace revenue currently generated by federal income taxes.
Earlier on the same call, he also reiterated a previous idea: using a portion of tariff proceeds to issue a direct dividend to Americans, while stating that “much of it is going to go towards reducing debt.”
Emphasis On Earners Below $200,000
Trump first floated a similar vision in April, claiming that once new tariffs “cut in,” many Americans would see their income taxes “substantially reduced, maybe even completely eliminated.”
He said the “focus will be on people making less than $200,000 a year,” describing the plan as a “bonanza for America” in a Truth Social post.
Economists Question Feasibility
Tax analysts and economists have cast doubt on the math behind Trump’s proposal. Alex Durante of the Tax Foundation said the figures simply do not work out and called it “not a realistic proposal.”
Kimberly Clausing, an economist at the Peterson Institute, raised similar concerns, pointing out that the tariff tax base is far smaller than the income tax base. She noted that the U.S. imported about $3.1 trillion in goods in 2023, whereas federal income tax is levied on more than $20 trillion in income — a gap that would make fully replacing income tax with tariffs extremely difficult.
