Trump Wants to Abolish the Income Tax
It's official: Donald Trump wants to abolish the income tax.
In a much-anticipated interview with Joe Rogan, Trump said the country should return to the late 19th century when we had no income tax at all and funded the federal government with tariffs.
For months now Trump's been making it clear he really doesn't like the income tax, exempting tax on tips, social security, overtime pay, first responders and even 18 million veterans.
I kept hoping he'd come out and just break up with the income tax once and for all. And he did.
So what if we end the income tax, laying off all 93,654 IRS agents so you can keep every dollar you earn.
Will Washington have to fund itself with bake sales?
Impact on the Economy
Well, the income tax currently costs the American people 2.4 trillion a year.
Trump proposes to replace it wth tariffs of 20% on everybody but China, who gets a special 60% tariff that might bring in 900 billion given we import around 500 billion from China and 3.5 trillion from everybody else.
This would grow America's economy like rocket-fuel. I’d guess near-term 20% increase in the economy, so about a $15,000 raise for the typical family.
In case you’re curious, that comes from one of my favorite papers in economics, by Christina and David Romer, that estimates that every dollar in taxes reduces GDP by 2 to 3 dollars.
Given the income tax is among the most growth-damaging tax out there — sales and property taxes much less so — I'd use 3 dollars at least.
That implies cutting net taxes by $1.5 trillion — remember, it’s minus $2.4 trillion income tax plus $900 billion of tariffs — would increase GDP by at least $4.5 trillion.
Which is close to 20% of GDP.
Concretely, this would come from increased work, investment -- startups and business expansions. Plus every company on earth trying to move to America because we'd be the mother of all tax havens.
Note that's on top of the $18,000 of income tax you no longer have to pay.
Knock off $3,000 for tariffs and you get $30,000 in additional income for the typical American family -- nearly $3,000 *per month.
It keeps getting better. Because going by low-tax countries today -- or America before the income tax -- we might double annual economic growth.
So 5% growth would be the new normal. And your kids would be three times richer than you — as it used to work in America.
Impact on the Budget
Of course ditching the income tax would also mean the mother of federal budget holes. After all, replacing 2.4 trillion in income taxes with 900 billion in tariffs is a big hole.
Even if you add, say, an extra 500 billion in payroll and excise from economic growth you've still got a trillion to cover.
Now we could let it run in deficit, letting the economy outgrow it. I mean, that’s what they do with everything else that doesn’t grow the economy.
But you could also cut a trillion in federal spending.
So how would you cut a trillion?
The other day Elon Musk estimated he could cut $2 trillion in waste and fraudulent payments. Ron Paul responded suggesting the military-industrial complex and the pharma-industrial complex.
Indeed, going by countries like Britain, perhaps 800 of the 900 billion we spend on military is for protecting Americans -- border, coast guard, nukes. It's for invading other countries.
As for pharma -- really the medical-industrial complex — if we were to, say, copy countries like Singapore we might save $2 trillion or more. Plus Americans wouldn't go bankrupt getting knee surgery. At any rate, there’s a trillion of federal spending of which most probably doesn’t need to happen.
Then, of course, there's the illegals -- $150 billion a year, at least. Plus the trillion-plus we spend on welfare, much of it to the able-bodied.
Sharpen some pencils and you get a trillion easy. Two if you’re serious about it.
So the country’s rich, the IRS is gone, plus you get a nice, lean government.
What’s Next
The uniparty would, naturally, fight this like a rabid dog.
But if a President can sell it to American voters, Congress will go along out of sheer self-preservation.
Plus, the bake sales would be lit.
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I also have a philosophy that Americans would be even more generous to charities if the government wasn’t taking so much of our money and giving to charities of their choice (eg, ‘forgiving college loans’ and the like), many of which I personally would never choose to donate to.
One more thing… I have a client that works for the FBI and investigates Medicare fraud. She said they won’t even look at a case for under a million dollars of fraud. At the end of the day, the federal government is just too big to be efficient and is ripe for fraud. Send almost everything back to the states!
I predicted in July in my Badlands Substack article “A Week to Remember” that eliminating the income tax and dismantling the financial system was Trump’s plan, and this is why they tried to kill him. The June 10th mentioning of tax-free tips was a shot across the bow. This was when they knew they had to kill him.