U.S. President Donald Trump has reignited his proposal to dramatically cut—and potentially eliminate—federal income taxes, outlining a bold plan to fund government operations through a sweeping new tariff regime on imported goods.
In a post on Truth Social dated April 27, Trump emphasized that the largest tax relief would focus on individuals earning under $200,000 per year. He also reiterated plans to create an “External Revenue Service,” a new framework that would replace the Internal Revenue Service (IRS) by relying exclusively on tariffs instead of personal income taxes to fund the federal budget.
Trump’s proposal could have wide-ranging economic consequences. If enacted, the elimination of federal income taxes would significantly boost disposable income for many Americans, potentially fueling investment across sectors such as cryptocurrencies, equities, and real estate. However, analysts caution that broader factors—like inflation and tariff-induced price increases—could offset some of those gains.
This ambitious fiscal shift comes as Trump’s administration pushes for an economy centered on domestic production and reduced dependence on foreign goods, aiming to fundamentally reshape U.S. financial policy if fully realized.
Trump’s Tariff-Driven Tax Plan Echoes Gilded Age Prosperity
Trump first hinted at his plan to replace income taxes with tariffs during an October 2024 appearance on the Joe Rogan Experience, but details were sparse at the time. Now, the President is framing the initiative as a revival of the economic model from the Gilded Age—a period in the late 19th century when the U.S. government operated without an income tax, funding itself primarily through import duties.
Trump argues that this historical approach fueled one of the most prosperous eras in American economic history.
Supporting this narrative, a recent study by accounting firm Dancing Numbers estimates that eliminating federal income taxes could save the average American about $134,809 over their lifetime. If additional wage-based taxes were also eliminated, lifetime savings could reach as high as $325,561 per person.
Despite the appealing potential for major tax savings, economists warn of unintended consequences, including inflationary pressures, trade tensions, and disruptions to consumer prices—outcomes that policymakers would need to navigate carefully if the proposal advances.
Shifting Tariff Policies Stir Volatility Across Markets
Earlier this month, President Trump signed a sweeping executive order establishing broad-based tariffs on all U.S. trading partners, imposing a 10% baseline duty on imports, with higher rates for nations that impose tariffs on American goods.
However, the administration’s messaging has since wavered, with tariff rates and timelines shifting repeatedly. This inconsistent approach has injected fresh uncertainty into global financial markets, rattling equities, bonds, and cryptocurrencies alike.
The volatility has been particularly pronounced across major asset classes. U.S. bond yields have surged, stock markets have experienced sharp swings, and Bitcoin and other digital assets have faced heightened price turbulence as investors attempt to digest the implications of the evolving tariff strategy.
Financial analysts have criticized the unpredictability of the administration’s trade policies, warning that prolonged volatility could undermine capital market stability and complicate efforts to stimulate economic growth.
Quick Facts
- President Trump proposes eliminating federal income taxes for individuals earning under $200,000, replacing the revenue with broad-based tariffs on imports.
- The plan includes creating an “External Revenue Service” to collect tariff revenues, effectively replacing the IRS’s role in income tax collection.
- Economists express concerns about inflation, trade tensions, and the feasibility of fully funding federal operations through tariffs alone.
- The proposal faces significant political hurdles, with debates ongoing over its potential economic impact and effectiveness as a fiscal strategy.
