The Trump tariffs have unleashed a wave of uncertainty across the global economy. But, Secretary of Commerce Howard Lutnick insists there’s a grand plan behind the chaos.
“I know what his goal is — no tax for anybody making under $150,000 a year,” he said in a recent appearance on CBS News.
“That’s his goal. That’s what I’m working for.”
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The comments align with Trump’s previous promise to "abolish" income taxes. However, neither Trump nor Lutnick have provided specific details about how this would be achieved.
A closer look at the numbers and the administration’s other actions makes this target nearly as likely as Trump’s assurance of cutting energy costs by half this year.
Can tariffs replace income taxes?
Eliminating taxes for people who earn less than $150,000 would effectively eliminate taxes for the vast majority of the country’s population. According to the latest U.S. Census Bureau data, roughly 3 in 4 American workers earned less than that amount in 2023.
However, individual income taxes are the largest source of revenue for the U.S. government. So far in fiscal year 2025, individuals have paid $959 billion in taxes, which is 51% of the total tax revenue collected, according to the Department of Treasury. Customs or import taxes accounted for just $35 billion or 1.9% of the total. These figures are likely to be much higher by the end of the fiscal year.
Meanwhile, analysis by the Peterson Institute for International Economics found that Trump’s tariff policy could generate roughly $225 billion per year in tax revenue — not nearly enough to offset a massive tax cut for much of the population. The report concludes that replacing income taxes with tariffs is impossible.
It should also be noted that the Trump administration’s attempts to replace income taxes with import taxes is more likely to benefit high-income households rather than lower- or middle-income ones.
Read more: Gold just hit a historic high of $3,000/ounce on Trump’s tariff moves — while US stocks got slaughtered. Here’s 1 simple way to prevent more pain within minutes
Most Americans should brace for higher costs
While some tariffs have already been implemented, Trump and congressional Republicans are working to extend the 2017 Tax Cuts and Jobs Act, which is set to expire at the end of this year. These tax cuts would offset the impact of higher costs on imported goods, however the impact isn’t spread equally across all households.