President Donald Trump has revealed that the United States may be on the verge of a historic tax overhaul, potentially eliminating the federal income tax altogether, as tariff revenues surge under his administration’s new trade policies.
Speaking at an event on Thursday night, Trump said the massive increase in tariff income could allow Americans to keep far more of their earnings.
“In the next couple of years, I think we’ll substantially be cutting, or maybe cutting out completely, but we’ll be cutting income tax,” Trump said.
“Could be almost completely cutting it because the money we’re taking in is going to be so large.”
The comments come as the Congressional Budget Office (CBO) confirmed that Trump’s tariff program, implemented between January 6 and May 13, 2025, is projected to slash the federal deficit by $2.8 trillion over the next decade.
Historic Tariff Shift Driving Revenue Surge
The CBO’s estimate incorporates Trump’s sweeping trade reforms, including:
• 30% tariffs on imports from China and Hong Kong
• 25% duties on autos, auto parts, steel, and aluminum
• A 10% general tariff on most other imports
• The end of duty-free treatment for low-value shipments from China
According to the CBO, the measures will directly reduce primary deficits by $2.5 trillion, and cut federal interest payments by another $500 billion, for a total savings of $3.0 trillion before economic adjustments.
Even after accounting for slight GDP softening and short-term inflation pressure, the net result is $2.8 trillion in deficit reduction, one of the most significant fiscal impacts of any modern policy shift.
Administration: Tariffs Will Pay Americans Directly
Commerce Secretary Howard Lutnick said last month that the administration plans to ensure Americans feel the benefits of the tariff program, literally.
“Well, look, the President wants to make sure the American people understand that the tariffs are there for their benefit, right?” Lutnick said on Fox Business Network’s Kudlow.
“Yes, it’s going to drive down our deficit.
“Yes, it’s going to make the country stronger.
“But he wants the people of America, the American people to appreciate these tariffs, and he knows if he puts money into their pocket and says, ‘Look, this was paid for by the tariffs,’ they’ll better understand how important this is for America.
“And so, that’s why he’s talking about it.”
The administration has described this as a “tariff dividend check.”
The dividend would be a direct payment to taxpayers, demonstrating how the tariff system offsets or replaces income tax revenue.
A Transformational Shift
Eliminating or drastically reducing the income tax would mark one of the most dramatic reversals of federal fiscal policy in U.S. history.
Trump has repeatedly argued that foreign producers, not American workers, should bear the cost of U.S. economic power.
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