Americans may not have to pay income taxes anymore if Donald Trump gets his way
President Donald Trump has proposed eliminating federal income taxes in favor of a tariff-based economic system, citing the years 1870–1913 as an example of expanding American wealth.
He suggests creating a new agency called the External Money Service (ERS) to manage tariffs and foreign funds in an attempt to reduce the tax burden on Americans.
Trump’s Tariff-Based Economic Strategy
At the 2025 Republican Issues Conference held at Trump National Doral Miami on January 27, Trump gave a presentation on his economic strategy to a group of Republican leaders. The three-day meeting was intended to shape his legislative agenda, AFP said.
In his speech, Trump referenced historical precedent, asserting that the US had succeeded before to 1913 without an income tax and instead depended on tariffs. From 1870 until 1913, he referred to this period as one of the most prosperous in the nation’s history.
“You know, from 1870 to 1913—and that was the richest period in American history, relatively speaking,” he claimed, “the U.S. operated entirely on tariffs.” He asserted that the task of determining how to manage the massive sums of money collected through tariffs was given to the Tariff Commission of 1887.
The amount of money was so large that they were unsure of what to do with it all. Teddy Roosevelt was able to use tariffs as a recipient to fund national parks and other projects. It wasn’t until 1913 that income taxation was introduced,” Trump added.
Tax other nations, not our citizens.
Trump argues that rather than taxing Americans to benefit foreign countries, the US should impose tariffs on those countries to benefit its own citizens. He believes that a tariff-centric strategy can make America “very rich again” “very quickly.”
Throughout his presidential campaign, Trump maintained his long-standing support for the idea of replacing income taxes with tariffs.
Could the United States Replace Income Tax with Tariffs?
Tariffs, often calculated as a percentage of the price of imported goods, are collected by U.S. Customs and Border Protection officials at ports of entry.
However, mainstream economists remain skeptical about tariffs as a significant revenue stream, arguing that they are an inefficient method to
However, this idea has sparked debate among economists and policymakers. Critics claim that tariffs are merely import taxes that are regularly transferred to consumers in the form of higher prices. This could counteract any gains from the abolition of income taxes by disproportionately affecting households with lower and moderate incomes.
Additionally, it is questioned whether tariffs alone are a viable way to fund the federal government.
It is anticipated that a 10% tariff will generate $350 to $400 billion year, which is less than the $4 trillion needed to sustain the current tax cuts for an additional decade. This imbalance might necessitate major adjustments to programs like Social Security and Medicare in order to balance the budget.
The External Party’s proposition
In order to manage tariffs and international trade income, Trump’s proposal calls for the establishment of a new organization called the External Revenue Service (ERS). But the creation of such an agency would need the consent of Congress. Given that the House and Senate are controlled by Republicans, the idea may become law.
Since Trump, who has promised to cut federal bureaucracy, would be creating an agency to undertake tasks currently handled by established organizations like the Commerce Department and U.S. Customs and Border Protection, the proposal has sparked concerns about government growth.
In contrast to the current Internal Revenue Service, which is in charge of domestic taxes, the proposed External Revenue Service would concentrate on getting money from outside sources.
Key Tariffs at the Center of Trump’s Economic Approach
As part of his broader economic strategy, Trump has proposed significant tariffs, including a 60% tariff on Chinese goods and a potential 25% levy on imports from allies like Canada and Mexico. Raising domestic revenue and reducing the tax burden on Americans are the objectives of these strategies.
In conclusion, despite its intention to reduce American taxes and increase national wealth through tariffs, the proposal raises significant concerns about its economic impact, feasibility, and potential effects on consumers and government programs.