Have you heard? Trump recently announced a plan to promote the elimination of personal income tax in the future. He hopes to replace the current personal income tax system by increasing tariff revenues, so that the public no longer needs to pay personal income tax. This plan has sparked widespread attention and controversy. Let's explore a few questions.
1. Can tariffs sustain the U.S. government?
First, let's look at a set of numbers:
In fiscal year 2024, the total revenue of the U.S. federal government is approximately $4.9 trillion, of which personal income tax contributes over $1.6 trillion, accounting for nearly half. This is the most stable and important source of revenue for the United States.
Let's take another look at tariffs. Indeed, during the Trump era, the tariff revenue in October 2025 reached a record high of $31.4 billion. But this is a world apart from the trillion-dollar gap. No matter how many more taxes are added, it's hard to fill that huge hole. More critically, tariff revenue fluctuates too much. International trade is deeply affected by political and economic conditions; what is high today may drop tomorrow, so it cannot serve as a 'stabilizer' for public finance.
Two, the economic 'side effects' of tariff policies
To make importers bleed, tariffs often have to be raised significantly, but in the end, it is the consumers who foot the bill.
Recent data shows that the growth rate of the U.S. economy decreased from 2.8% in 2024 to 2.0% in 2025, and it may continue to decline to 1.7% next year. Meanwhile, inflationary pressures are greater, with the consumer confidence index in November dropping to 88.7, and retail sales growth nearly stagnating. If this continues, things will become more expensive, the public won't be able to afford them, and the economy will naturally slow down.
Three, businesses are squeezed, and the job market suffers as a result.
Businesses are also struggling. Tariffs make imported raw materials more expensive, and many manufacturing and retail costs have skyrocketed. Manufacturers either raise prices or lay off workers. In the ISM manufacturing survey, many business managers admit to lacking confidence in the future. Over the long term, the employment market will certainly be impacted; this is not an alarmist statement.
Four, the political gamble behind the cancellation of personal income tax
From a political perspective, Trump's move is very clever—who doesn't want to pay less tax? But from an economic perspective, it is almost gambling with the national treasury.
Personal income tax is not only a source of revenue but also a pillar of the U.S. financial system. Without it, how can the government maintain huge expenditures on defense, education, healthcare, and infrastructure? Relying on tariffs to fill the gap may further widen the fiscal deficit.
Worse still, if the U.S. raises taxes comprehensively abroad, trade partners will definitely retaliate. Once a trade war starts, both businesses and consumers will have to pay the price for the 'tax-free dream.'
To sum it up: Trump's idea is bold, but the reality is harsh. Tariffs may temporarily increase revenue and cater to public opinion, but completely replacing personal income tax is nearly impossible. What do you think, dear viewers?
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