Eliminate the income tax? Trump says he could do it thanks to tariffs

Donald Trump claimed he could cut or even eliminate the federal income tax thanks to the tariffs. The president made this comment on Nov. 27 during a Thanksgiving call with U.S. military personnel, stating that the revenue generated from his trade policies would be sufficient to offset the elimination of the tariff.

While he clarified that the money generated by the tariffs will initially be used to pay down the public debt as Treasury Secretary Scott Bessent has already done on other occasions, the extra money could also help lower a tax that affects many pockets across the country.

"We’re taking in hundreds of billions of dollars like we’ve never done before. And some of that’s going to go back in a form of a sort of dividend to our people, but much of it’s going to go toward reducing debt," Trump said on the call.

"Over the next couple of years, I think we‘ll substantially be cutting and maybe cutting out completely, but we’ll be cutting income tax, could be almost completely cutting it, because the money we’re taking in is going to be so large," he added.

The initiative almost immediately won the backing of Tennessee Republican Congressman Tim Burchett, who endorsed it on social media.

Currently, and for individuals, the tax brackets for federal income tax are as follows:

The history of the federal income tax

Although in today's world it is common currency in almost all countries, the truth is thatthe federal income tax is something quite modern that arose initially to meet extraordinary expenses, but then quickly settled in the tax range of the countries. As Martin Litwak, author of 'Tax Havens and Tax Hells', recalls, any citizen of the 17th century would be struck by the fact that "states compulsively take from individuals part of what they produce".

The United States was born in 1776 with a deep distrust of the tax burden, embodied in the motto "No taxation without representation", and it took 15 presidencies before Congress passed the first federal income tax, via the Revenue Act of 1861, to finance the Civil War. It had only two rates, 3% and 5%, andwas repealed ten years later because of public rejection.

Congress came back in 1894 with the Tariff Act, which imposed a 2 % on income over $4,000. But that attempt was struck down by the Supreme Court in Pollock v. Farmers' Loan & Trust Co. (1895), holding that the tax was a direct tribute that was not apportioned among the states according to population. The majority opinion, written by Justice Melville Fuller, declared the law's tax structure unconstitutional and void.

Despite the ruling, lawmakers, led by Democrats such as William Jennings Bryan, even with support from the progressive Republican wing, insisted on establishing an income tax. Conservatives then devised a political gambit: propose a constitutional amendment requiring ratification by three-fourths of the states, thinking it would fail. But the opposite happened: in a political climate marked by progressivism, the states began to approve it one after another.

On February 3, 1913, Delaware became the 36th state to ratify it, and Secretary of State Philander Knox officially proclaimed the 16 Amendment, which gave Congress the power to "lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration". 

Shortly thereafter, Congress passed the Underwood Tariff, pushed by theWilson Administration, which reinstated the federal tax at a rate of 1% for incomes over $3,000, affecting only 3% of the population. Since then, the United States has gradually expanded its system of tax brackets and the scope of the income tax.