Introduction
Talk about scrapping the federal income tax seems to keep popping up, especially when Donald Trump stepped to the mic during his second term. One of his pet ideas is to replace income tax with taxes collected on goods we import. Some folks love the thought of no income tax, picturing extra cash in their paychecks and way less tax paperwork. Still, a change this big needs more than a catchy sentence. In this post, we’ll break down how likely it is to toss the income tax, what the One Big Beautiful Bill (OBBB) of 2025 said about it, and whether import tariffs can actually bring in the money the federal government needs.
Trump’s Public Tax Proposals
When Trump talked about taxes, his plans were as bold as they were shiny. In rally after rally, and on countless TV hits, a handful of ideas kept coming up:
- Clear out income tax for most middle earners. Trump kept saying we should wipe the income tax slate clean for workers making between $150,000 and $200,000 a year, hinting we might even bump that number up and help anyone within a few thousand dollars of it.
Exclude certain income sources from taxation: Some plans call for dropping taxes on tips given to servers, extra pay from overtime, and monthly Social Security checks. The reasoning is that leaving these amounts untaxed could lighten the load for families and retirees who count these dollars to make ends meet.
Replace income tax with import tariffs: The most daring idea is to scrap all federal income taxes and fund the government instead by charging high taxes on products from other countries that come into the U.S.
Officials say such changes could lift wages for workers and revive factories. Still, lawmakers and analysts see big hurdles, starting with the numbers.
Tariffs as a Revenue Replacement
On paper, ditching the income tax and leaning on tariffs looks doable. Each year, America brings in about $3 trillion of stuff from abroad, pretty much the same amount the federal government collects through income taxes. Some folks take this figure to mean tariffs can easily plug the hole.
Yet a closer look gives doubts:
- Targeted rates would need to be sky-high: Hitting the same income tax total would mean charging tariffs of roughly 100% on every imported item. Today, the U.S. charges an average of 22.8%, and even that feels big compared to what rates looked like decades ago.
- Economic consequences: Hiking tariffs to record highs would raise the price of nearly all goods brought in from abroad, forcing the economy into inflation mode. Everyday items, the parts manufacturers rely on, and basic raw materials would hit shockingly high price tags, squeezing everyone.
- Effects on low-income families: Unlike graduated income taxes that hit wealthier earners more, tariffs take the same bite from everyone. Families that live paycheck to paycheck would see gas, groceries, and other basics jump in price, leaving their budgets thinner.
Also, if steep tariffs actually entice more goods to be made in the U.S., imports would drop. That would shrink the very revenue the system relies on, pulling money away from the program that the hikes were supposed to fund in the first place.
What the One Big Beautiful Bill (OBBB) Really Does
New talk of scrapping income taxes suddenly resurfaced when the One Big Beautiful Bill zipped through Congress in July 2025. But the truth is that OBBB does not get rid of income taxes at all. Instead, the measure tinkers with parts of the existing law created by the Tax Cuts and Jobs Act in 2017. Some important takeaways are:
- Bigger standard deduction: By raising the basic deduction, more of a family’s paycheck goes untaxed. That cut makes filing a lot easier—especially for the many people who don’t bother with itemized deductions.
- OBBB offers tax credits that zero in on specific groups to help them the most. The bill adds a tip credit for workers in the service industry, a senior relief credit for retirees, and claws out a bigger childcare credit for families with kids still in diapers. These credits target money where there’s real need, instead of lowering rates for everyone and hoping it works out.
- Marginal tax rates for middle-income earners also stay lower, thanks to a temporary dip that’s now been re-extended. That means the workers who use the middle generations’ paychecks each day still keep a bit more to spend. In short, the law keeps the middle-class pipeline of relief open.
Still, the applause for the promised, full tax elimination in the campaign trail will need to quiet. The law’s smaller offers are a bridge gap in an even bigger gap.
Proposals vs. Reality
Campaigns shine fireworks, but budgets face gravity. The law keeps income tax—about 47% of federal revenue—on the books. That’s still expected to pull in around $2.2 trillion in 2025 alone. Authorities need that mountain of money. Chopping it out with no replacement isn’t an option. The only moves left would be to cut safety nets workers depend on, or to invent a different revenue route that folks will also bill. So far, neither option is in sight.
Some advocates once floated putting tariffs on couches and phones to fund the government. Sounds simple, but the math stumbles. Pricey duties would put a dent in shoppers’ bills and, in a different lane, trigger tariffs from trade partners, who don’t pay respect to political morals. Push that trade escalator, prices that were a 100 in Nashville would bounce to 130, and the t-shirt plant in Nashville, relying on those same, now costly, parts that come from Taiwan, would face a plant-list day. The ward solutions instead stay in the drawing room.
Could Income Tax Disappear?
Short answer: probably not anytime soon. Here’s why:
- Legal Roadblocks: The U.S. Constitution and existing law lock in the income tax. Getting Congress to rewrite the tax code would take time and massive political will—both in short supply these days.
- Funding the Government: The feds need about $3 trillion each year to keep the lights on. Finding other sources of revenue—be it higher tariffs, VAT, or carbon taxes—big enough to fill that gap and keep the economy running smooth is no small task.
- Market Jitters: Taxing income differently could spook investors, raise prices for consumers, and chop growth. Markets hate uncertainty, and a sudden tax overhaul would serve it on a platter.
- Tariffs on Their Own: Even if lawmakers raise tariffs to sky-high levels, the extra revenue would shrink fast as higher prices push consumers to buy overseas, and inflation would negate the gains.
Conclusion
Talk about flattening or scrapping income tax grabs headlines but rarely makes it to law. Proposals like the “One Big Beautiful Bill” tweak deductions and credits but do not axe the income levy. Sure, some folks keep pining for a national sales tax or VAT, but doing it and making it work are two different games.
So, for now, income tax is here to stay. The best move for taxpayers? Keep planning, keep saving, and when in doubt, call a pro to help make the most of a tax system that is complex now and likely to stay that way.
For expert tax guidance, contact Dimov NYC CPA today and make sure that you are fully prepared for any changes to the tax system.
FAQs
Is Trump eliminating income tax?
No. While Trump has discussed removing income tax, no current law eliminates it. Federal income tax remains in place.
What is the One Big Beautiful Bill (OBBB)?
The OBBB raises the standard deduction and adds new tax credits, but it does not remove income tax.
Will I still pay income tax in 2026?
Yes. Federal income tax will still apply unless Congress passes a major tax law change, which hasn’t happened.
Could tariffs replace income tax?
Unlikely. Tariffs alone couldn’t raise enough money without causing high inflation and trade issues.