In a bold move that echoes financial policies of the past, President Donald Trump (“President Trump”) has proposed a radical overhaul of the American tax system by advocating for the complete elimination of the Federal Income Tax. Announced during an episode of the “Joe Rogan Podcast,” this proposal suggests a return to a tariff-based revenue system, which President Trump asserts could rejuvenate the American economy by shifting the tax burden from Income Tax to imports.[i] While not formally introduced yet, this proposition aims to rekindle the economic strategies of the U.S. from 1870 to 1913, a period often cited as one of economic prosperity and growth and characterized by its reliance on tariffs. As this plan unfolds, it prompts a vigorous debate not only about its potential impact but also on its feasibility.
Long before the Federal Income Tax was established, the U.S. relied predominantly on tariffs as its main source of revenue. Proponents of a shift back to a tariff-based system argue that this move would promote economic independence, increase consumer spending, and simplify taxation.[ii] To achieve these goals, President Trump has proposed eliminating the Internal Revenue Service (“IRS”) and creating a new agency, the External Revenue Service (“ERS”), to manage and enforce tariffs.
Supporters argue that by taxing imports rather than individual incomes, the U.S. could revive and strengthen industries suffering from international competition. For example, over the past decades, the U.S. has seen a significant decline in manufacturing employment and production capabilities. Since 1979, manufacturing employment has decreased by 46%, with the sector failing to recover fully after each economic recession.[iii] Additionally, since 2002, the number of U.S. manufacturing firms has decreased by 21%, indicating a broader decline across most manufacturing sectors apart from the food, beverage, and chemical industries.[iv] The drop in manufacturing firms is concerning since, in the past twenty years, despite experiencing fewer recessions, the industry saw a 14% net decline in manufacturing jobs.[v] Experts argue that higher import duties would legally incentivize businesses to produce goods domestically rather than relying on cheaper foreign labor and materials. By making foreign goods more expensive through tariffs, domestic manufacturers could become more competitive, potentially reversing decades of job losses in key industries.[vi]
Additionally, eliminating the Federal Income Tax would put more money directly into the hands of American workers, potentially boosting consumer spending. Historically, when disposable income is high, consumer spending on both essentials and luxuries tends to increase, which helps stimulate economic growth.[vii] Changes in tax policies that increase disposable income, such as tax cuts, have in the past directly stimulated consumer spending. Under President Trump’s proposal, American workers would be allowed to keep their entire paycheck rather than having a portion deducted for federal taxes. The government would instead generate revenue through import duties rather than taking a percentage of workers’ earnings.
Naturally, many are wary of replacing a relatively steady and predictable source of revenue like the Income Tax with tariffs. However, President Trump’s tariff on all Canadian and Mexican products led to negotiations in which the United States-Mexico-Canada Agreement (“USMCA”) was created. The USMCA replaced the North American Free Trade Agreement (“NAFTA”) with terms that were more favorable to the U.S.[viii] This outcome exemplifies how the strategic use of tariffs can compel neighboring countries to reconsider their trade policies due to the crucial market size the U.S. holds.
Critics of the tariff proposal warn that it would introduce a high level of uncertainty into the economy. Unlike Income Taxes, which provide consistent revenue, tariff income fluctuates based on trade volume, political relations, and global supply chain disruptions. A heavy reliance on tariffs could introduce financial volatility. This may deter investment and disrupt markets relying on imports.
Moreover, there is concern that shifting to a tariff-based system may disproportionately impact lower and middle-income families. Some economists argue that tariffs disproportionately impact these families because import taxes raise the cost of goods.[ix] Lower-income families spend a larger portion of their income on essential goods, meaning price increases due to tariffs could burden them more than wealthier individuals. However, supporters of President Trump’s plan counter that eliminating the Income Tax would give these families greater financial flexibility. Furthermore, these families could choose to purchase from American manufacturers, who do not pay tariffs because they do not rely on imports.
Beyond domestic concerns, a tariff-based system could also escalate global trade conflicts. For example, the U.S. is bound by numerous bilateral trade deals and World Trade Organization commitments, many of which prohibit excessive tariff increases without renegotiation.[x] A unilateral move to dramatically raise tariffs could trigger retaliatory measures from key trading partners, as seen in historical trade disputes such as the Smoot-Hawley Tariff, passed in 1930, which significantly increased the prices of imported goods to the U.S.[xi] Other countries retaliated with their own tariffs, creating a trade war that was widely considered to have worsened the Great Depression by further damaging the already struggling economy.
Constitutionally speaking, while President Trump’s proposal to replace the Federal Income Tax with tariffs may seem like a straightforward policy shift, it raises significant constitutional and legal questions regarding its feasibility. Any attempt to eliminate the Income Tax and rely solely on tariffs must navigate several legal hurdles, including the constraints of the 16th Amendment, Congress’s broad taxation and spending powers, and the Commerce Clause’s regulation of trade. Before the ratification of the 16th Amendment, the Supreme Court’s ruling in Pollock v. Farmers’ Loan & Trust Co., 157 U.S. 429 (1895), struck down a Federal Income Tax as unconstitutional, classifying it as a direct tax that required apportionment among the states.[xii] The 16th Amendment was enacted to circumvent this restriction since it explicitly grants Congress the power to levy an Income Tax without apportionment among the states.
Repealing the 16th Amendment would require a constitutional amendment process under Article V, requiring either a two-thirds majority vote in both houses of Congress or a constitutional convention called by two-thirds of the states, followed by ratification from three-fourths of state legislatures.[xiii] While constitutional amendments are historically difficult to pass, this repeal could gain significant political traction due to the direct financial benefits it offers to citizens. Eliminating the Federal Income Tax would allow individuals to keep their entire paycheck, a policy that would likely be highly popular among voters and state legislatures looking to boost economic activity.[xiv] States with high-income earners or growing economies may be particularly inclined to support repeal, as the shift away from Federal Income Taxation could increase economic growth within their jurisdictions. If framed correctly, the movement to repeal the 16th Amendment could garner enough support to become a serious political effort despite the inherent challenges of amending the Constitution.
However, repealing the 16th Amendment is only the first step in fundamentally reshaping the federal tax system. Even without an Income Tax, Congress would still retain broad taxation authority under the Taxing and Spending Clause, which grants the power to impose excise taxes, duties, and tariffs.[xv] This means that while eliminating the Income Tax would remove one major source of government revenue, it would not prevent Congress from introducing alternative forms of taxation to compensate for the loss. The key legal and economic question is whether tariffs alone could constitutionally and practically sustain federal revenue at necessary levels. Historically, tariffs were the primary source of government funding before the Income Tax era, but the modern economy presents new challenges.
Another major legal challenge is the Commerce Clause, which grants Congress the power to regulate trade among the states and with foreign nations. The Supreme Court in West Lynn Creamery, Inc. v. Healy, 512 U.S. 186 (1994), ruled that Congress cannot enact trade policies that unfairly burden certain industries or disproportionately impact individual states.[xvi] A tariff-based revenue system would need to be structured uniformly to avoid favoring or harming specific industries or regions, as a selective or uneven application could lead to legal challenges.
Overall, while the idea of eliminating the Federal Income Tax is appealing to those seeking tax relief and economic reform, its feasibility remains deeply uncertain due to significant constitutional, legal, and economic challenges. With such a sweeping policy change, the debate remains centered on whether the benefits outweigh the risks and if such a system could realistically sustain government operations without causing widespread economic disruption. The success of such a policy would hinge on its execution and the ability to navigate the myriad of economic, political, constitutional, and social challenges it presents.
[i] See PowerfulJRE, Joe Rogan Experience #2219 – Donald Trump, YouTube (Oct. 25, 2024), https://youtu.be/hBMoPUAeLnY?si=D_jyMUDrKbFZ201p.
[ii] See Scott Nevil, What Is a Tariff and Why Are They Important?, Investopedia (Feb. 13, 2025), https://www.investopedia.com/terms/t/tariff.asp?utm.
[iii] See Katelynn Harris, Forty Years of Falling Manufacturing Employment, U.S. Bureau of Labor Stat. (Nov. 20, 2020), https://www.bls.gov/opub/btn/volume-9/forty-years-of-falling-manufacturing-employment.htm.
[iv] See Meghan Ostertag, The Census Bureau Confirms US Manufacturing Has Declined, ITIF (Aug. 9, 2024), https://itif.org/publications/2024/08/09/census-bureau-confirms-us-manufacturing-declined/.
[v] See Dorothy Neufeld, Visualizing the Decline of U.S. Manufacturing, by Sector (2002-2022), Visual Capitalist (Aug. 28, 2024), https://www.visualcapitalist.com/the-decline-of-u-s-manufacturing-by-sector/?utm.
[vi] See Bryan McKenzie, Q&A: What Are Tariffs and How Will They Affect Us?, Univ. of Va. (Feb. 4, 2025), https://news.darden.virginia.edu/2025/02/04/qa-what-are-tariffs-and-how-will-they-affect-us/?utm.
[vii] See Mitra Toossi, Consumer Spending: An Engine for U.S. Job Growth, U.S. Bureau of Labor Stat. (Nov. 2002), https://www.bls.gov/opub/mlr/2002/11/art2full.pdf.
[viii] See Katie Lobosco et al., 6 Key Differences Between NAFTA and the USMCA Deal That Replaces it, CNN (Dec. 17, 2019), https://www.cnn.com/2019/12/10/politics/nafta-us-mexico-canada-trade-deal-differences/index.html?utm.
[ix] See Tyler Moran, Tariffs Hit Poor Americans Hardest, PIIE (July 31, 2014), https://www.piie.com/blogs/trade-and-investment-policy-watch/2014/tariffs-hit-poor-americans-hardest?utm.
[x] See Tariffs, World Trade Org., https://www.wto.org/english/tratop_e/tariffs_e/tariffs_e.htm?utm_ (last visited Mar. 18, 2025).
[xi] See Kris J. Mitchener et al., The Smoot-Hawley Trade War, CATO (Nov. 3, 2021), https://www.cato.org/research-briefs-economic-policy/smoot-hawley-trade-war.
[xii] See Pollock v. Farmers’ Loan & Trust Co., 157 U.S. 429, 607–08 (1895) (Harlan, J., dissenting).
[xiii] See U.S. Const. art. V.
[xiv] See John H. Cochrane, Abolished the Income Tax Bring on the Consumption Tax, CBR (Feb. 12, 2024), https://www.chicagobooth.edu/review/its-time-us-abolished-income-tax?utm.
[xv] See U.S. Const. art. I, § 8, cl. 1–2.
[xvi] See West Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 206–07 (1994) (Scalia & Thomas, JJ., concurring) (Rehnquist & Blackmun, JJ., dissenting).
