Trump Says Americans “May Soon Pay No Income Tax” as White House Eyes Tariff-Only Funding Plan
During a Dec. 2, 2025 Cabinet meeting, President Trump proposed eliminating the federal income tax and relying primarily on tariff revenue to fund the U.S. government — a move economists warn would create massive deficits and disruption.
- Tariff revenue proposal: President Trump said tariffs could replace income taxes, but administration officials offered more measured language. (CPA Practice Advisor, Fox Business)
- Huge revenue gap: Income taxes yielded about $2.7 trillion vs. $258.1 billion from tariffs in 2025 — economists say replacing one with the other is unrealistic. (CPA Practice Advisor)
- Existing legislative vehicle: The FairTax Act of 2025 (H.R. 25) would repeal income tax and replace it with a national sales tax — a politically heavy lift.
Trump’s tariff revenue proposal and public statements
At a brief post-Cabinet press gaggle on Dec. 2, Mr. Trump described tariff collections as potentially enormous and capable of paying refunds and eliminating income tax. He said,
“We’re going to be giving back refunds out of the tariffs because we’re taking in literally trillions of dollars… at some point in the not-too-distant future you won’t even have income tax to pay because the money we’re taking in is so great, it’s so enormous that you won’t have income tax to pay.”
These remarks were reported by CPA Practice Advisor and Fox Business.
Trump suggested the shift could occur “over the next two, three, four years,” or could be pursued partially as deep income-tax cuts rather than full repeal — elevating a previously fringe idea into a mainstream White House discussion.
The math problem: why economists say tariff-only funding is unrealistic
Independent economists and policy analysts emphasize a stark fiscal mismatch. The federal government collected about $2.7 trillion from income taxes last fiscal year — roughly 54% of total federal revenue — while tariffs produced an estimated $258.1 billion in 2025. Replacing income tax receipts with tariffs would create a multitrillion-dollar shortfall. (CPA Practice Advisor)
Dean Baker of the Center for Economic and Policy Research summarized the scale: if tariffs replaced income-tax revenue, the federal deficit could rise by roughly $2.3 trillion, pushing annual deficits toward $4 trillion — about 13% of U.S. GDP under current spending patterns. He called the idea “mathematically impossible” without major spending cuts or new revenue sources. (CPA Practice Advisor)
Treasury fiscal data show the government spent more than $7 trillion while collecting $5.2 trillion in revenue in the relevant fiscal year; tariffs make up only a small sliver of receipts and would need to rise many times to cover obligations, or the government would need sharp cuts to services, benefits and defense. (CPA Practice Advisor)
Administration’s more measured framing
Not all senior officials embraced full elimination of the income tax. Treasury Secretary Scott Bessent described tariff proceeds as a possible vehicle for targeted tax relief — for example, exempting tips and Social Security benefits, reducing taxation on overtime, or restoring interest deductibility for American-made auto purchases — rather than as a wholesale replacement. (CPA Practice Advisor)
Legislative path and political hurdles
A legislative vehicle already exists in name: the FairTax Act of 2025 (H.R. 25). The bill would repeal the federal income tax, abolish the Internal Revenue Service and replace federal income and payroll taxes with a national retail sales tax. Passing such sweeping change requires a House majority, Senate support and the president’s signature — a tall political order given the complexity and public debate involved. (Congress.gov; Fox Business)
Supporters say the FairTax model simplifies collection and shifts the burden to consumption; critics say it is regressive, would hit lower-income families harder, and create uncertainty for states and businesses.
Broader context: why this would be a major U.S. tax system overhaul
Abolishing the federal income tax would be the most ambitious overhaul of the U.S. tax system in more than a century — reversing financing choices that have funded federal programs for generations. The president’s tariff-driven approach centers trade policy as the primary financing mechanism, turning import duties into the main source of federal funding if enacted. (Fox Business; CPA Practice Advisor)
Implications for Los Angeles, California
Economic impact
Los Angeles, as a major port and trade hub, could see higher prices for imported goods and altered shipping volumes. Higher tariffs on many products could raise costs for consumers — from electronics to clothing — and ripple through retail, hospitality and manufacturing supply chains that rely on global imports. Exporters from the region could face retaliatory tariffs abroad. (CPA Practice Advisor; Fox Business)
Political consequences
Los Angeles voters — a mix of moderates and progressives — may worry about rising consumer prices and uneven burdens. City and state leaders will likely demand clear plans showing how tariff revenue would replace income taxes without cutting local services. State officials could consider responses, such as adjusting sales or local taxes to shield vulnerable households. (CPA Practice Advisor; Congress.gov)
Social effects
A tariff-reliant system risks being regressive, shifting more of the burden onto lower- and middle-income households who spend a larger share of income on goods. In Los Angeles, where many families face high housing and living costs, higher prices for essentials would compound economic pressure. Advocates for seniors and low-income residents will likely call for protections, exemptions or rebates if consumption taxes rise. (CPA Practice Advisor; FairTax legislative text)
Cultural relevance & practical applications
Tariff-driven tax policy intersects local debates on global trade, immigration and California’s role in the world economy. For Los Angeles residents, outcomes could include smaller or no federal income tax on paychecks but higher sticker prices at stores and online. Retirees on fixed incomes may face higher costs for essentials, and local planners will need clear guidance on payroll withholding, sales prices and household budgets. (CPA Practice Advisor; Fox Business)
Legislative and civic action in Los Angeles
City and state leaders, business coalitions and consumer groups are likely to weigh in if tariff revenue becomes central policy. Los Angeles-area members of Congress and state legislators will face pressure to explain effects on local jobs, prices and services. Community organizations and unions could mobilize to advocate for protections for low-income households and frontline workers. (Congress.gov; CPA Practice Advisor)
Sources: CPA Practice Advisor; Fox Business; Congress.gov
