Don’t Fall for the No Income Tax Fantasy

We’re nowhere near April, but income taxes are everywhere in the news these days… and, I can assure you, all over Twitter/X.

Trump has floated plans to eliminate personal income taxes in America. His base is vibrating with exuberance like a dog that knows it’s headed to the vet.

But it is a stupid idea.

I take that back. The idea, in theory, is wonderful. No income taxes! I love that. It’s one of the reasons I live in Portugal—the move dropped my local tax rate to 0%.

In operational terms, however, the idea is stupid because it is entirely unworkable.

Let’s walk through the math so that you understand, too, why no income tax is just a boneheaded notion that will never see the light of day (much like those $5,000 DOGE dividend checks that, I assume, all got lost in the mail).

First, some numbers that we necessarily have to play with today:

• Total US federal revenue for fiscal year 2025 is approximately $5.2 trillion, based on Treasury and Congressional Budget Office data.
• Individual income taxes account for about half of this, or roughly $2.7 trillion.
• America imports goods worth about $4.2 trillion annually.
• Current tariff revenue is about $257 billion so far in 2025. Even with sustained, high tariff rates, the wildest projects say the US can expect tariff revenue of about $260 billion annually. (Remember: These tariffs are a tax on American consumers and American businesses, not a tax on an exporting country, so Americans are paying all this additional money.)
• The average US tariff under Trump’s “Tariff is the most beautiful word in the word in the dictionary” regime is between 17% and 18%.

Ok… the table is set.

Now, on to the meal.

To replace all personal income taxes with tariff revenue, the US would need to generate about $2.5 trillion from tariffs (the $5.2 trillion in current federal revenue, minus the $2.6 trillion from personal taxes).

But tariffs will bring in, at most, roughly $260 billion—just 10% of the money missing because personal taxes went poof!

Thus, Uncle Sam still has a huge nut to cover exceeding $2.3 trillion.

To fully replace those personal income taxes, tariffs would have to climb to roughly 60% on every single item. No exceptions. No cutting sweetheart deals because some nation gave you an airplane or whatever.

Sixty percent—right across the board.

Inflation in America would ramp up dramatically higher because a lot of what Americans consume is reliant on imports that have no domestic supply… bananas, coffee, cocoa, manganese, rare earth metals, lithium, potassium, and on and on.

Estimates indicate that the 2025 tariffs so far have led to a price increase of 1.1% to 1.5% economywide, meaning American households on average have already lost $1,200 to $2,400 in purchasing power.

Again, that’s with average tariffs in the 17%-18% range.

So you can imagine that a 60% rate across the board would financially abuse American wallets.

Yet those crowing about “no income tax!” seemingly fail to grasp one particular truth: Consumer behavior would radically shift in America.

Americans aren’t just going to shrug their shoulders and willingly, if grudgingly, pay 60% more for what they buy.

Too many American households already struggle financially. Credit card debt sits at historic levels. As such, consumers will abandon foreign goods. They’ll either do without, or they’ll switch to some kind of domestic knock-off/adequate replacement.

And what does that do?

It shrinks tariff revenue.

Suddenly, 60% across the board is no longer enough to fill the revenue gap because Americans have reduced the spending on foreign products, which erodes tariff revenue.

Tariffs would then need to reset even higher to fill the gap… which just further reduces spending on foreign goods and further shrinks tariff income.

In short, using tariffs to replace personal income taxes is a self-defeating strategy simply because capitalism works. Consumers are a highly self-interested lot and they will absolutely, guaranteed, without a doubt stop buying foreign goods in order to stretch their income farther… and the whole “tariffs can replace personal income” schtick crumbles.

Not hard at all to see that a 60% tariff on all imports would radically and fundamentally distort the domestic consumer market. It would also disrupt global trade overall, and 100% lead to retaliation from China, the European Union and others…

Which would see US exports plunge… shoving the US economy into a deep recession, if not depression… and driving inflation higher.

Here’s a real life example. A box of De Cecco penne pasta (made in Fara San Martino, Italy) that now costs about $2.80 at Walmart (I just checked), will suddenly cost $4.48 because of the 60% tariffs. And that just means that a box of Walmart’s Great Value store-brand penne that costs $1.18 at the moment can easily shoot up to $2.50 and still deeply undercut the Italian brand.

Either way, American households are paying more.

Which then raises the question: Ok—what else could the US do to replace personal income?

The only other viable option is a national sales tax or a value-added tax, a US VAT.

It’s a very European tax model, which means lots of Americans will immediately blanche since there’s so much euro-hate in the US these days.

But we’ll assume a VAT pops up in the no-personal-tax conversation. Why is that stupid too?

We still have to replace that missing $2.5 trillion. Relying on a VAT to do so means a tax rate in the 20% to 40% range, depending on how it’s structured and what is and isn’t taxed.

However, we need some perspective…

The average personal income tax rate in America, per the IRS, is about 15%.

So American taxpayers would be trading a 15% tax rate for a tax rate of as much as 40% on everything they buy. Granted, my last elementary math class was decades ago, but I feel pretty confident in asserting that a 40% tax (or even a 20% tax) on everything Americans buy will instill far more pain on household income than a 15% personal income tax.

There are people—I have conversations with them—who say, “Yes, but that means I can choose what to pay a tax on, and if I don’t want to consume, then I pay no tax!”

Very, very true.

But very, very shortsighted

A lack of consumption by American consumers just means that, again, there’s not enough tax revenue to replace that missing $2.5 trillion… so Uncle Sam will be borrowing even more money every year to keep the country from going dark.

So, returning to where we began, this idea that America will abolish personal income taxes and replace the missing revenue with tariff income… well, it’s stupid.

The math doesn’t—and cannot—add up.

All it accomplishes ultimately is pumping more helium into an already over-inflated debt balloon straining not to pop.

What I’m saying is that as a dot-connector… these dots do not connect.

No personal income taxes will arrive on the same day those $5,000 DOGE checks do.