YEREVAN (CoinChapter.com) — Before the 16th Amendment was ratified in 1913, the United States relied on tariffs rather than income taxes to fund the federal government. Income taxes were not permanent, and most government revenue came from import tariffs.
In October 2024, former President Donald Trump proposed eliminating the federal income tax and replacing it with tariffs on imported goods. The idea was discussed during his appearance on the Joe Rogan Experience, where he pointed out that the U.S. government historically operated without a federal income tax and relied on trade tariffs.
Trump’s Tariffs: Lifetime Tax Savings
A report from Dancing Numbers states that replacing income taxes with tariffs could result in significant tax savings for Americans. The research found that eliminating the federal income tax could save the average American at least $134,809 over their lifetime. If state wage-based income taxes are also removed, total lifetime savings could reach $325,561 per person.
Top 5 High-Tax States Expected to Benefit Most from Trump’s Tariff Plan. Source: Dancing NumbersCertain states would benefit the most from this shift. According to the report, residents of New Jersey, New York, Connecticut, Illinois, and Massachusetts currently face the highest lifetime tax burdens. These states could see the largest reductions in tax payments under Trump’s tariffs.
Trump’s Tariffs: Tax Refund Proposal
Punit Jindal, founder of Dancing Numbers, provided further details on the potential tax changes. He stated:
“In all likelihood, Trump’s plan will be preceded by a 20% ‘DOGE Dividend’ tax refund of cost savings from the Department Of Government Efficiency.”
This refund would provide an immediate tax cut before a complete federal tax repeal takes place. The report suggests that Trump’s tariffs could lead to an alternative way of funding the government while reducing income tax burdens.
Economic Impact and Trade Policy
The shift from income taxes to tariffs could affect asset prices and trade costs. Some experts suggest that lower income taxes may lead to increased consumer spending and market investment. However, higher tariffs on imported goods could raise prices for certain products.
The report notes that Trump’s tariffs could influence trade policies between the United States and its partners. Retaliatory tariffs from other nations could impact imports and exports, leading to changes in global trade dynamics.
IRS Replacement: Trump’s Tariffs and New Tax Agency
In January 2025, Howard Lutnick—who was confirmed as Commerce Secretary in February 2025—echoed Trump’s proposal. He suggested replacing the Internal Revenue Service (IRS) with an external revenue service.
Lutnick commented on the history of tariffs as a funding source for the U.S. government:
“At the start of the 20th century, America was the richest country on Earth, and we defended our workers from unfair trade policies with tariffs.”
He added:
“Now, imagine politicians, who can’t even balance their own checkbook, taking our money, and what do they do every year? They just take more.”
His remarks reflect a broader discussion on the future of tax policy in the United States. The proposal to replace the IRS with a tariff-based tax system continues to be debated among lawmakers and economists.
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