President Donald Trump has recently claimed his tariffs will generate so much money that Americans could soon stop paying federal income taxes. But experts say he's overpromised.
Tariff revenue doesn't even come close to where it would need to be if federal income taxes were eliminated, and experts say such a plan isn't at all feasible.
In his 2024 presidential campaign, Trump promised to use tariffs to achieve a wide range of goals, including preventing war, reducing trade deficits, improving border security, and subsidizing childcare.
The findings are clear: US customs revenue increased by approximately 200 billion US dollars in 2025. Foreign exporters absorbed only about four percent of the tariff burden, 96 percent passed through to US buyers. Trade volumes collapsed, but export prices did not fall.
Among its key features, the proposed tax plan: Reduces existing tax brackets from seven to three, eliminating the Head of Household Filing Status and broadening tax brackets. Reduces the top marginal income tax rate for ordinary income from 39.6 percent to 33 percent.
President-elect Donald Trump campaigned on lowering the US corporate income tax rate to 15 percent. He made the same request in 2017 when Republicans passed their tax cuts, but Congress only cut the federal rate to 21 percent—down from the worldwide high of 35 percent.
The standard deduction increased for 2025 and 2026, and a new temporary “bonus” deduction for adults 65 and older begins in 2025. The child tax credit increased to $2,200 for the 2025 and 2026 tax years; retirement plan contribution limits for IRAs and 401(k)s also increased for 2026.
Consumers, both individuals and businesses, are negatively impacted by higher prices. However, the domestic industry protected by the tariff, such as U.S. coffee producers, benefits by being able to sell more of their product. The government also benefits by collecting additional revenue from the tariff.
As an objective matter, tariffs have failed to deliver an increase in manufacturing employment in this country this year. Uh matter of fact, over the last year, manufacturing employment has gone in the wrong direction.
Trump's tariffs have significantly increased U.S. customs revenue, with figures showing collections soaring past $200 billion annually in recent years (FY 2025), driven largely by tariffs on Chinese goods, though the actual revenue collected is lower than gross collections due to impacts on other tax bases, with projections estimating trillions more in future revenue, but primarily paid by American consumers and businesses, not foreign exporters.
Consumption taxes, whether American style sales tax or European style VAT, could replace income tax. Income taxes around most of the world are progressive, while consumption is flat over the long term, so a rebate can be implemented, if desired, to make the flat tax progressive.
They have been "very low" since 1950 or so, he said. The average duty on goods subject to a tariff was about 2% to 4% in the 2010s before Trump's first term, Mitchener said. "That's what President Trump is trying to overturn, this sort of low period of tariffs we've had since World War II," Irwin said.
Formula calculation
The Trump administration's Office of the United States Trade Representative (USTR) explained that the tariffs "are calculated as the tariff rate necessary to balance bilateral trade deficits between the U.S. and each of our trading partners", aiming to "drive bilateral trade deficits to zero".
The economy is growing at about the same pace as it did in Obama's last years, and unemployment, while lower under Trump, has continued a trend that began in 2011." Nominal wages, consumer and business confidence, and manufacturing job creation (initially) compared favorably, while government debt, trade deficits, and ...
President Biden's economic policies, termed "Bidenomics," focused on "middle-out and bottom-up" growth, leading to significant job creation (over 16 million), historically low unemployment, and strong investment in manufacturing, clean energy, and infrastructure through legislation like the Inflation Reduction Act and CHIPS Act, while also navigating post-pandemic recovery with stabilizing inflation and increased household wealth, despite challenges like higher mortgage rates and increased national debt.
Since World War II, according to many economic metrics including job creation, GDP growth, stock market returns, personal income growth, and corporate profits, the United States economy has performed significantly better on average under the administrations of Democratic presidents than Republican presidents.
Seven major tax cuts took effect for 2025 under the OBBBA:
The One Big Beautiful Bill Act (OBBBA) or the Big Beautiful Bill (P.L. 119-21), is a U.S. federal statute passed by the 119th United States Congress containing tax and spending policies that form the core of President Donald Trump's second-term agenda. The bill was signed into law by Trump on July 4, 2025.