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- Trump has reportedly floated the idea of eliminating income tax and substituting it with tariffs on imports if he defeats Joe Biden in the November polls.
- The proposal’s proponents say it would be a huge relief for the average American who can use the money to invest, with riskier assets such as Bitcoin and stocks set to be the biggest beneficiaries.
If Donald Trump emerges victorious in the upcoming US elections, Americans might pay little or no income tax at all. The Republican Party frontrunner is weighing replacing the taxes with tariffs, a move that his supporters say would be a big relief for the average American.
Trump held a meeting with GOP lawmakers at the Capitol Hill Club on Thursday, and according to sources, an “all tariff policy” was among the proposals he floated.
The billionaire’s campaign later confirmed the proposals. A statement from campaign spokesperson Karoline Leavitt said:
President Trump simply floated the idea as one of many brought up during the conversation, and he has said many times that as tariffs on foreign countries go up, taxes on American workers can come down. President Trump’s top priority remains making the Trump Tax Cuts permanent.
Marjorie Taylor Greene, a controversial Georgian Republican representative, attended the meeting and, speaking to Bloomberg, said she supported the idea, as did everyone present.
“President Trump says, ‘This is an idea, but I’d love to raise tariffs’, and then he said, ‘and maybe even no income taxes on Americans.’ Everyone was clapping in the room. I think that’s a fantastic idea,” she stated.
The former president cares about the average American and wants to reduce the tax burden, “and that could be offset and paid for by some type of tariffs, particularly on adversarial nations,” stated New York Republican Representative Nicole Malliotakis.
Trump has consistently supported increased tariffs for years. In his first term as president, he pushed the country to implement higher tariffs on imports, especially those from China. For decades, US policy has focused on lowering tariffs to reduce trade barriers. However, with the economic antagonism between the US and its adversaries like China and Russia intensifying, many are rethinking this approach, even those that have supported free trade.
“Republicans who are free trade realize there has to be a balance. Trump’s message on tariffs has been embraced,” says Texas Representative Jodey Arrington, a Republican.
Trump’s proposal has its challenges. For one, income tax accounts for a significantly higher chunk of federal income than tariffs, as illustrated by the graph below from the Office of Management and Budget. For tariffs to match the income tax, they would have to be hiked drastically.
Not everyone is in favour of the proposals. Brendan Duke, an economist from the left-leaning Center for American Progress, wrote:
There is no tariff that could replace revenue from $2T of income taxes by taxing $3T of imports. If you did somehow manage to pull this off, it would be a big tax increase for the bottom 90% and a tax cut for the wealthy.
If the tax cuts were to pass, the average American’s investment ability would rise significantly, and as was evidenced during the COVID-19 era, this money usually flows to riskier assets such as stocks and Bitcoin.
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