Citing the “hundreds of billions of dollars” the U.S. is receiving in tariff revenue, President Donald Trump said last week that his administration could completely eliminate the income tax in the U.S. over the next couple of years.

“I think we’ll substantially be cutting—and maybe cutting out completely—but we’ll be cutting income tax. It would almost be completely cutting it because the money we’re taking in [from tariffs] is going to be so large,” Trump said in a Thanksgiving Day video call with U.S. military personnel. “We’re taking in hundreds of billions of dollars, like we’ve never done before.”

This isn’t the first time Trump has thrown out the idea of getting rid of the federal income tax. During speeches on the campaign trail last year, Trump mentioned the possibility of eliminating individual income taxes. While a guest on the Joe Rogan Experience podcast in October 2024, Joe Rogan asked Trump whether he was serious about his income tax proposal. “Yeah, sure, why not?” Trump answered. The U.S. would pay for the lost tax revenue with far-reaching tariffs, he added.

CNBC reported last February that during a private meeting with Republican lawmakers in June 2024, Trump floated the idea that, if elected, he might eliminate the federal income tax by creating an “all tariff policy.”

Then in a March 2025 interview with CBS News, U.S. Commerce Secretary Howard Lutnick said the president hopes to eliminate federal income taxes for people who earn less than $150,000 a year, but he didn’t cite tariff revenue as the impetus for that idea.

“I know what his [Trump’s] goal is: No tax, for anybody who makes less than $150,000 a year. That’s his goal. That’s what I’m working for,” Lutnick said in the interview.

But tax policy experts and economists say the president’s idea to eliminate the federal income tax doesn’t add up.

Newsweek noted last week:

Income tax currently accounts for more than half (54 percent) of total government revenue, per the latest data from the Treasury Department, with individual income taxes contributing $217 billion of the $404 billion collected last month. The roughly $689 billion in outlays, combined with shutdown impacts and delayed benefit payments, resulted in a deficit of $284 billion for the month, despite an October record of $31 billion in net tariff revenues.

For Fiscal Year 2025, which ended September 30, the government collected $195 billion in customs duties, up more than 250 percent from the previous year, while bringing in nearly $2.7 trillion in income taxes.

The sizable disparity has led economists—when such proposals were previously made—to question whether tariffs could come close to offsetting the fiscal impacts of abolishing income tax while still allowing the government to pare down the national debt.

In a post on LinkedIn this past weekend, Elina Linderman, an enrolled agent and founder of La Rusa, a full-service tax and accounting firm in Clearwater, FL, called Trump’s plan to eliminate the federal income tax “bold” but added “economically, it’s nearly impossible.”

She wrote:

🌍 Who Actually Lives Without an Income Tax?
Countries like the UAE, Qatar, Kuwait, the Bahamas, the Cayman Islands, and Monaco truly have no personal income tax.
But their economic systems are entirely different:
• their budgets rely on oil, tourism, and financial services,
• they have small populations,
• a large portion of revenue comes from VAT, customs duties, and consumption taxes,
• and their wealthy resident base generates high per-capita income for the government.

💰 Why the U.S. Can’t Replicate This
Even if the U.S. tried to replace income taxes with other sources, the math doesn’t work:
• Tariffs bring in around $200 billion per year,
• Income taxes bring in over $2.5 trillion.
That’s a $2.3 trillion gap.
To close it, tariffs would have to increase tenfold, which would immediately drive up consumer prices, provoke trade retaliation, and crush industries dependent on imports.

⚖️ The Core Problem
The U.S. federal budget spends trillions on social programs, healthcare, defense, and interest on the national debt.
These obligations require stable, predictable revenue, not volatile tariff income that fluctuates with global trade.

📈 Impact on the Markets
Talks of lower taxes can temporarily boost investor sentiment and lift stocks tied to consumer spending.
But in reality, a surge in tariffs and import costs would do the opposite — fuel inflation, weaken sales, and pressure the stock market.

Bottom line:
A tax cut — maybe.
A full elimination of income tax — pure fantasy.

Erica York, vice president of federal tax policy at the Tax Foundation, said in a Nov. 28 post on X that eliminating the federal income tax due to gains in tariff revenue is “mathematically impossible,” adding that Congress would have to approve any such move.

“To replace the roughly $2 trillion of revenue raised by the individual income tax with tariffs would require astronomically high tariff rates,” she wrote in a separate X post last Friday. “And those rates would shrink imports, making it impossible to generate enough revenue to replace the income tax.”

The Supreme Court heard arguments last month on a case related to Trump’s use of emergency powers to justify the sweeping tariffs on foreign trading partners.

During oral arguments on Nov. 5, justices seemed skeptical of Trump’s power to implement a broad worldwide tariff regime, although some sounded reluctant to potentially limit presidential authority over foreign affairs.

Photo caption: President Donald Trump speaks to reporters while on a video call with U.S. military personnel on Thanksgiving Day 2025.

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