Peter Hanna

Associate Editor

Loyola University Chicago School of Law, JD 2026

Amongst some of the recent policy proposals made by the new administration in the White House, President Donald Trump has discussed the possibly of eliminating federal income taxes. He said, “We’re going back to the old days. No income tax, just tariffs. It worked before, and it’ll work again.” This controversial, bold proposal has sparked some significant and intense debate over its potential impacts on the economy, overall feasibility, and likely impacts on everyday Americans. President Trump hopes to replace income taxes with alternative revenue sources including tariffs and consumption taxes. The arguments on both sides are quite interesting.

He argues that abolishing the income tax while imposing tariffs on foreign trade will bring wealth back to Americans, while critics argue that a tariff-based revenue system implemented by the federal government will raise the costs of everyday items, leading the average American to bear most of the cost of this plan in both the short term and the long term. All-in-all, implementation of a plan like this faces some substantial hurdles—such as congressional approval—especially when considering the reliance of the federal government’s operations on federal income taxes (the largest source of federal revenue at 49.3% of total revenue). A loss of such a large chunk of the government’s total revenue will require some monumental changes to tax policy in order to recover that lost revenue.

The potential consequences of eliminating the federal income tax

Eliminating the federal income tax could create some significant challenges. For the short-term, the tariff-based tax plan could lead to higher prices on everyday items, and consumers could find themselves paying a higher price for many goods that they need. With the tariffs being imposed on foreign goods, the American based sellers of these good will ultimately pass these higher prices onto the consumer. This would disproportionately affect poorer Americans, because they spend a larger portion of their income on necessities (housing, utilities, food, etc.). On the other hand, those who spend a lower percentage of their income on necessities and earn income from investments would not be as vulnerable. Consumption taxes are more regressive in nature–they will affect all consumers (no matter their wealth levels) equally on similar purchases. Income taxes are seen to be more progressive in their structure—the higher amount you earn in income, the larger percentage you give back in taxes. This could mean that lower-income Americans that spend a larger proportion of their income on basis day-to-day needs could shoulder a larger burden than higher-income individuals.

When you consider how heavily the federal government relies on income tax revenue, a shift to a tariff-based system would necessitate a complete overhaul of the United States’ fiscal structure. Also, a rise in tariffs might lead to violations of international trade agreements and lead to foreign trading partners retaliating with similar tariffs being imposed on the United States.

Additionally, a shift from funding the Federal government through tariffs and consumption, rather than through income taxes, leaves the potential of not generating enough revenue to sustain certain essential public services and programs, such as Social Security, Medicare, and national defense. Coming up short in overall revenue by the Federal government could lead to some cuts to those previously mentioned (and more) government programs, showing more of the disproportionate effects and results of this governmental action.

The arguments in favor of abolishing the Federal Income Tax

Supporters of this plan contend that it could provide immediate financial relief to American workers by simply allowing them to keep more of their earnings. These proponents suggest an increase of disposable income can help to stimulate consumer spending, entrepreneurship, and ultimately drive economic growth. Another solid argument in favor of abolishing the income tax is simplifying the country’s tax system, because the current tax code is ridiculously complex. The current system requires individuals and businesses to spend a lot of time, resources, and (most importantly) money on assuring that they are compliant with their tax duties. An elimination of this source of tax revenue could remove the need for extensive, intense Internal Revenue Services (IRS) oversight and tax filing processes.

Some also argue that shifting to a tariff-based revenue system where the government would basically fund itself by taxing imported goods could create a fairer structure by incentivizing saving and investing instead of penalizing productivity and earnings. Advocates of this plan believe this can create a reduction in government overreach, resulting in a more transparent, less intrusive federal revenue collection system.

Could this actually happen?

There are undoubtedly some major hurdles this proposal will face on its way towards its unlikely implementation. These hurdles have led countless policy experts to demonstrate major skepticism towards its likelihood. The biggest and most obvious challenge is the need for congressional approval—it is unlikely lawmakers would come to support such a drastic shift in government revenue sources without clear and provable replacement streams for this lost revenue. It is also worth noting that past attempts to change the tax system have faced quite significant political resistance, since the first implementation of the income tax in 1913. Therefore, any attempt to replace or repeal the federal income tax would require quite broad bipartisan support, and with a polarizing issue like this one, the likelihood of this plan coming into fruition is extraordinarily slim.