CNN: President Trump wants to ‘abolish’ the IRS and replace it with tariffs. Can it work?

by EzekielDiet.com
Posted on Mar 01, 2025

Ezekiel Diet Note: I hear alternative media hosts regularly opining about President Trump’s plan to abolish the Internal Revenue and replace it with an External Revenue (tariffs) like it could actually happen.

In George Carlin’s candid comedic wisdom: It won’t happen and here’s why.

There are two numbers I want you to memorize. The IRS collects approximately $3 trillion in income tax annually, and we import approximately $3 trillion worth of goods annually. Now do the math. What percentage of the $3 trillion in import goods would it take in tariffs to replace $3 trillion in IRS revenue? BINGO, 100% in tariffs. Overnight everything coming from outside the USA doubles in price.

Now flex your brain one more time. What happens when prices double? Sales collapse and fall off. Even 100% in tariff taxes wouldn’t be enough. Expect prices to triple on all imports. This would cripple the economy.

There’s something else going on here I believe. President Trump has been known to make claims like this to gain a bargaining position. The idea is to keep 82,900 employees at the IRS (and 1.4 million US accountants and auditors) anxiety ridden, fearful, depressed, demoralized, and terrorized for months about losing their job, home, cars, pension, and healthcare. Then, at some point after 1.5 million people are weary from fear; President Trump can sit down with the IRS and say “give me this, this, and this, and I’ll back off the shutdown of your terrorist organization.” My guess would be President Trump wants lower tax rates and a bunch of freebies like no taxes on tips, overtime, and Social Security, etc. etc. He’ll justify it with all the DOGE cuts. Everybody gets a piece of that pie.

I believe President Trump learned this tactic from decades of filing lawsuits to gain a better position when negotiating.

CNN actually did the best job in my opinion explaining why this is a ridiculous proposal.

Here’s an excerpt from their article:

Trump wants to ‘abolish’ the IRS and replace it with tariffs. Can it work?

No one wants to pay taxes, and practically every American dislikes the IRS. But, as the saying goes, the only guarantees in life are death and taxes. So the IRS is here to stay.

Right?

Well, maybe not, according to Commerce Secretary Howard Lutnick.

“Donald Trump announced the External Revenue Service, and his goal is very simple: to abolish the Internal Revenue Service and let all the outsiders pay,” Lutnick said on Fox News Wednesday night.

In other words: America will raise so much money from President Donald Trump’s tariff plan that Americans will no longer need to pay income taxes.

It sounds great. But it’s riddled with problems.

America raises about $3 trillion each year from income taxes. The United States also happens to import around $3 trillion worth of goods annually. So that means tariffs would have to be at least 100% on all imported goods for tariffs to replace income taxes, said Torsten Slok, chief economist at Apollo Global Management, in a note to investors Thursday.

But replacing all that tax revenue is not even as simple as doubling the price of everything that comes into America, Slok notes: If you remember your Econ 101 class, as prices rise, demand trails off. Just ask Walmart, which said Thursday morning it expects sales growth to slow this year because of Americans’ concerns about high prices and tariffs.

So the government would have to find the right fulcrum point to balance its revenue needs with consumer demand. That could mean much higher prices.

“The challenge is that it is unclear what will happen to sales if all imported products double in price,” Slok said. “Given higher prices result in lower sales, it may require as much as 200% tariffs on all imported goods for the total tariff revenue to replace income taxes.”

So now we’re potentially talking about quadrupling the price of everything that comes into the country from overseas and across the border: cars, electronics, drugs, clothing, shoes, energy, you name it.

Even if consumers would accept much higher prices in exchange for zero income taxes, the plan still faces another potential problem: One of Trump’s stated reasons for tariffs is to incentivize companies to make stuff in America. If that happens en masse, and imports fall through the floor, where will America’s revenue come from?

Read the rest of the article here: https://www.msn.com/en-us/money/taxes/trump-wants-to-abolish-the-irs-and-replace-it-with-tariffs-can-it-work/ar-AA1zsiGB

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