In a meeting with Republican lawmakers at the Capitol Hill Club in Washington D.C. on Thursday, former President Donald Trump discussed replacing income taxes with revenue tariffs.
Currently, tariffs are responsible for relatively little of government revenue, bringing in only $88.3 billion a year. Income taxes, on the other hand, bring in $2.2 trillion, over twenty times that of tariffs. A replacement of the income tax with greater protective tariffs would require significant increases in the latter.
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Forbes estimates such an “all-tariff” policy would require an average tariff of 85% on imports. Such a policy could lead to higher prices but would likely also provide greater incentives to reshore manufacturing in the United States.
Given the rapacity of government spending, and the entrenchment of the income tax, it is unlikely that such an “all-tariff” policy is possible under current political conditions, even if Trump wins re-election. However, as Trump appears poised to pursue both greater protectionism and lower taxes, a second Trump administration might represent a shift in the direction of such a policy.
A replacement of the income tax with a revenue tariff would represent a return to the original principles of the Republican Party. For example, Abraham Lincoln and the early Republicans were strong supporters of high-tariffs, with this position arguably being decisive in Lincoln’s electoral victory in 1860. Their high-tariff policy is considered a key factor in the pro-free-trade South’s decision to secede.
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