Trump: Federal taxes will be "significantly reduced" after tariffs are in place.

Source: Cointelegraph Original: "Trump: Federal taxes will be "greatly reduced" after tariffs are in place"

U.S. President Trump recently stated that once the tariff system is fully implemented, the federal income tax will be "significantly reduced" and may even be completely eliminated.

In a Truth Social post on April 27, Trump added that this tax reduction plan will primarily target individuals with an annual income below $200,000.

Trump also mentioned the concept of "External Revenue Service" - referring to funding the federal government through import tariffs rather than the current IRS tax model.

Analysis suggests that the abolition of federal income tax could become a positive factor driving up asset prices, including cryptocurrencies, as part of the increase in disposable income would flow back into productive investments. However, this stimulative effect is not guaranteed.

Trump first proposed the idea of abolishing federal income tax during his appearance on the Joe Rogan show in October 2024, but at that time, Trump, who was in the midst of a campaign, did not provide specific details about the proposal.

The U.S. president stated that replacing federal income tax with revenue from import tariffs would bring the United States back to the prosperous era of the Gilded Age in the 19th century, when the U.S. had not yet established a permanent federal income tax.

A study by the accounting automation company Dancing Numbers found that Trump's proposal could save the average American $134,809 in lifetime tax expenditures.

Dancing Numbers added that if other wage-related income taxes are also eliminated, the maximum tax savings for each American could reach $325,561.

On April 2, Trump signed an executive order imposing comprehensive tariffs on all U.S. trading partners, including a baseline tariff of 10% on all countries, and implementing different "reciprocal" tariffs on countries that impose import tariffs on U.S. goods.

However, the Trump administration has repeatedly changed its position on tariff policies, being erratic regarding the implementation timing of tariff rates and the tariff system.

The constantly changing rhetoric of the Trump administration regarding trade policy has intensified volatility in the U.S. stock market, led to rising U.S. bond yields, and attracted widespread criticism from financial analysts. They argue that these protectionist trade policies harm capital markets but achieve little.

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