President Donald Trump told service members that federal income tax could be cut almost completely in the coming years, funded instead by far higher tariffs on imports.
The promise appealed to many taxpayers who imagined bigger paychecks and fewer complicated forms when the April filing season arrived.
Economists and budget experts, however, quickly pointed out that the numbers did not add up. Tariff revenue had risen sharply after new import duties took effect.
Yet it still covered only a fraction of what the federal government collected each year from individuals and corporations through the income tax.
How much tariff revenue did Washington really collect
In the latest fiscal year, the federal government collected about 195 billion dollars in customs duties after the new Trump tariffs took effect.
That figure represented a steep increase compared with the previous year and reflected higher rates on a wide range of goods from many trading partners.
The same budget tables showed that income taxes brought in more than two trillion dollars from households and businesses.
Individual income tax receipts, payroll-related levies, and corporate income tax together formed the core of federal revenue.
Compared with those flows, tariff income looked small, even in a record year for border collections.
Did you know?
In the early years of the United States, federal tariffs and excise duties accounted for most federal revenue before the income tax became permanent in 1913.
Why tariffs cannot match the income tax base
Economists stressed that imports form a much narrower base than national income. The United States imported around three point one trillion dollars in goods, while more than twenty trillion dollars in wages, profits, and other income faced tax each year.
A smaller base meant far higher rates would be needed to raise comparable sums. Analysts at the Peterson Institute and other research groups modeled aggressive tariff scenarios.
They found that even a revenue-maximizing average tariff near 50% would likely peak at about $780 billion in annual customs receipts.
That total would still fall well short of existing income tax collections and would leave a gap larger than one trillion dollars.
What economists say about consumer and business costs
Specialists also highlighted who actually paid the tariffs. While the Trump administration described the policy as making foreign exporters pay, studies of past tariff rounds showed that most of the cost tended to land on American importers and final consumers through higher prices on goods ranging from machinery to household products.
Alex Durante from the Tax Foundation and other experts warned that a tariff-only system would shift the tax burden toward shoppers and firms that rely on global supply chains.
They argued that families on modest incomes would feel the hit in daily purchases, while small manufacturers could lose access to competitively priced inputs they needed for production.
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Legal risks that threaten Trump's tariff funding strategy
Even the elevated tariff revenue that had already arrived faced serious legal uncertainty. The administration relied heavily on emergency economic powers laws to impose some of the broad new duties.
Those measures drew multiple lawsuits and eventually reached the Supreme Court, which heard arguments over the scope of presidential authority.
Several justices signaled concern that the executive branch might have stretched the law beyond its original intent.
If the Court rejected the use of emergency statutes for sweeping trade restrictions, the government could be forced to roll back many tariffs.
It might even need to refund a large share of recent collections, which would punch a new hole in the federal budget.
What could a tariff-only tax system mean for Americans?
Replacing the income tax with tariffs alone would require much higher border taxes on almost every imported item. Economists explained that this shift would likely raise prices on clothes, phones, appliances, and vehicles, which together made up a large share of household spending.
The rise in everyday costs could offset or even exceed any gain from lower paycheck withholding. Such a transformation might also trigger retaliation from major trading partners.
If other countries answered the United States' tariffs with their own barriers, American exporters could lose market access abroad.
Farmers, industrial firms, and service providers would face new obstacles just as they adjusted to higher costs for imported equipment and materials at home.
Looking ahead, budget experts saw more realistic paths through a mix of modest tax reform and disciplined spending choices rather than a single dramatic shift to tariffs.
They predicted that future debates would still feature bold promises of tax relief, yet any sustainable plan would need to balance revenue with obligations for Social Security, health programs, defense, and interest costs.
Voters, they argued, would ultimately judge proposals by whether they protected living standards, preserved economic competitiveness, and shared the tax burden fairly across regions and income groups.
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