Republican voters are used to their politicians marketing tax cuts on the campaign trail.
Every few cycles, we see a Republican enter office and cut income taxes and corporate taxes by a couple of percentage points, or implement some other sort of tax reform.
In our lifetimes, however, Americans have never seen a meaningful paradigm shift in the way the government collects revenue.
President Donald Trump wants to see that shift happen, specifically by relying on tariffs rather than income taxes to fund the federal government.
The returning commander in chief floated the idea of drastically hiking tariffs and entirely ending the income tax on the campaign trail, the U.K. Telegraph reported in October.
At a campaign stop at a barber shop in New York, the Telegraph reported, Trump referred to a time in the 19th century when trade tariffs levied on foreign goods entering the country paid for the government’s operations rather an individual income tax on American citizens.
He also brought up the idea in a private meeting with Republican lawmakers in June, CNBC reported at the time.
And though we are not used to such a system, the idea has garnered quite a lot of interest.
To be clear, the amount of money collected through tariffs would have to increase substantially, and the size of the federal beast must decrease even more. Tariffs alone couldn’t fund the federal government as it is in the modern world.
Alex Durante, the senior economist at the Tax Foundation, told CNBC in a report published Wednesday that “you can’t have 21st century government spending with a 19th century tax system.”
He is correct. Even though tariffs were a major source of funding for the federal government through much of our country’s early history, the aftermath of President Franklin Roosevelt’s New Deal, President Lyndon Johnson’s Great Society and countless foreign conflicts have landed us with a bloated federal bureaucracy.
Tariffs could not even come close to footing the bill.
According to CNBC, Customs and Border Protection collected some $77 billion in tariffs during fiscal year 2024.
That may seem like a lot, but such an amount only covers a meager 1.57 percent of our federal budget, CNBC reported.
Under a tariff-based regime, we would also see prices for domestic goods increase.
The costs of paying higher import fees would simply mean that companies would raise the prices of the items sold in the United States, which would eat into American pocketbooks.
In other words, there are clear difficulties with the tariff plan.
But when combined with a lower or eliminated income tax and a substantially smaller federal government, we may be able to rely on tariffs much more.
For one, lowering income taxes would make up for the increased cost of goods in the economy, since households would have more money to handle the expenses.
Even better, it would mean that families could decrease their effective tax burden by spending less, since the government is not scooping directly into their bank accounts every single year to seize the fruits of their labors.
None of this even considers how tariffs promote manufacturing and job growth at home rather than overseas.
In short, the tariff idea from Trump could not work under our current state of affairs, and the American people won’t be saying a permanent goodbye to the Internal Revenue Service any time soon. But that does not mean it could never work — or that that “goodbye” could never happen.
At the very least, it is refreshing to see actual conversation, and the first fruits of action, toward a badly needed reform with how we are taxed and how the federal government impacts our lives.
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