Former President Donald Trump reportedly has suggested replacing the individual income tax with revenue generated from new tariffs.
This not possible.
In 2023, the individual income tax generated $2.2 trillion in federal revenue while Americans imported $3.1 trillion in goods.
Based on that level of imports, it would take a tariff rate of 71 percent to generate $2.2 trillion in federal revenue.
However, a tariff rate of 71 percent would dramatically reduce the volume of imports. As a result, the revenue generated would be nowhere close to $2.2 trillion.
Additionally, the revenue hit would be worsened by the massive economic disruption a 71 percent tariff would inflict on the economy, the resulting lost exports and global trade war, and the indirect impact of transitioning from a progressive individual income tax system to a regressive import tax system.
BOTTOM LINE: Replacing the income tax with tariffs is a fantasy because it is impossible to generate $2.2 trillion from tariffs on merchandise imports.