Trump says no income tax could be coming as White House eyes tariffs to replace federal revenue
President Trump said on Dec. 2, 2025, that Americans may soon pay no federal income tax, asserting tariffs could replace income-tax revenue; Treasury and independent economists warned the tariff-only plan would create a multitrillion-dollar shortfall.
Key takeaways
- Trump suggested tariffs could fund government spending and allow elimination or large reduction of federal income tax. (Fox Business, CPA Practice Advisor).
- Treasury Secretary Scott Bessent favors using tariff receipts for targeted relief rather than a full repeal of the income tax. (CPA Practice Advisor).
- Experts say current tariffs ($258.1 billion) are far below income-tax revenue ($2.7 trillion), leaving a large budget gap. (CPA Practice Advisor).
- The FairTax Act of 2025 would repeal income taxes and replace them with a national sales tax; it remains a bill in Congress.
Trump’s argument: tariffs as a new revenue stream
At a Dec. 2 cabinet meeting press gaggle, President Trump said,
“at some point in the not too distant future you won’t even have income tax to pay,”
and suggested tariffs could generate “so great… so enormous” revenue to fund government spending. He repeated a theme advanced through 2025 that higher tariffs and border taxes can produce vast new receipts for the Treasury. (CPA Practice Advisor).
Trump framed the proposal as a simplification of the tax code and a return of power to taxpayers, saying the shift could occur “over the next two, three, four years.” He also floated exempting individuals earning under $150,000 and discussed FairTax-style ideas in 2025 media appearances. (Fox Business).
Treasury’s response: targeted relief rather than full repeal
Treasury Secretary Scott Bessent has urged caution and proposed a narrower use of tariff proceeds. Bessent suggested using tariff receipts to fund specific measures—such as removing taxes on tips, exempting Social Security from income tax, cutting taxes on overtime, and restoring interest deductions for American-made automobiles—rather than abolishing the income tax entirely. That approach signals a phased or partial plan. (CPA Practice Advisor).
The revenue gap and experts’ concerns
Independent analysts emphasize that tariffs are currently a small share of federal revenue. Recent figures show the federal government spent more than $7 trillion in the last fiscal year while collecting about $5.2 trillion in revenue. Of that, income taxes accounted for roughly $2.7 trillion, while tariff collections for the current calendar year were estimated at $258.1 billion. Those numbers illustrate a wide gap between income-tax receipts and tariff receipts. (CPA Practice Advisor).
Progressive economist Dean Baker estimated that replacing income-tax revenue with tariffs alone would increase the annual deficit by roughly $2.3 trillion, pushing the total to about $4 trillion — near 13% of GDP. Baker concluded that “tariffs alone would not be enough to replace the revenue lost by eliminating income tax,” raising questions about funding for defense, Medicare, Social Security, and other major programs. (CPA Practice Advisor).
Political and legislative hurdles
A move to abolish the federal income tax would be among the most sweeping fiscal changes in generations. The FairTax Act of 2025 provides one legislative blueprint: repeal the Internal Revenue Code, abolish the IRS, and institute a national sales tax administered largely by the states. But the bill remains a proposal and would need broad congressional support to pass. (Congress.gov).
Even with a conservative majority, lawmakers would face hard choices. Fiscal conservatives who favor tax cuts also often prioritize balanced budgets; removing income tax while maintaining current spending levels would likely raise deficits unless paired with deep spending cuts or new reliable revenues. Moderates and many Democrats have signaled skepticism about replacing trillions in income-tax revenue with much smaller tariff receipts. (Fox Business).
Economic and trade effects to consider
Relying heavily on tariffs would alter trade flows and raise import costs. Higher tariffs tend to increase prices for U.S. consumers and can provoke retaliatory tariffs from trading partners, potentially reducing exports and disrupting supply chains for manufacturers and farmers. Economists warn tariffs can protect some domestic industries but often shift the tax burden onto consumers — including retirees on fixed incomes. (CPA Practice Advisor).
FairTax Act of 2025: the legislative alternative
The FairTax Act of 2025 would repeal federal income and payroll taxes and replace them with a national sales tax. Supporters argue this would simplify tax administration and spur growth; critics counter a national sales tax is regressive and would hit lower- and middle-income households hardest unless accompanied by rebates or exemptions. The bill would require profound changes to federal and state tax administration. (Congress.gov).
Implications for Walla Walla, Washington
Local residents and businesses in Walla Walla could see mixed effects. Some households would welcome lower income-tax bills — particularly higher earners — but tariffs often raise prices on imported groceries, electronics, and inputs used by small businesses. Walla Walla’s wineries, which export and sell domestically, could face shifting export conditions if trading partners retaliate, affecting sales and jobs.
Agriculture is central to the local economy. Tariff-driven trade disruptions could hurt crop prices and market access for farmers; if foreign buyers face higher prices due to tariffs or retaliation, demand for Washington agricultural exports could fall, threatening farm income and employment.
Removing federal income tax would not change state or local taxes directly, but federal changes can prompt state policy adjustments. Washington has no state income tax and relies on sales, business, and property taxes; a higher national sales tax under proposals like the FairTax Act of 2025 could influence state debates and retail patterns in Walla Walla. Local tax preparers, payroll services, and advisers should monitor D.C. developments. (CPA Practice Advisor, Congress.gov).
Legal and administrative questions
Abolishing the income tax raises immediate questions about the IRS’s fate, federal enforcement, refunds, and the transition to any new system. The FairTax Act of 2025 calls for eliminating the IRS, which would require a long, complex transition affecting federal payments to local recipients and contractors in places like Walla Walla. (Congress.gov).
What to watch next
Residents and leaders in Walla Walla should monitor:
- White House policy papers and revenue projections related to tariff-based funding.
- Treasury statements from Secretary Scott Bessent on phased relief measures. (CPA Practice Advisor).
- Congressional action on the FairTax Act of 2025 and independent fiscal analyses of tariff revenue potential. (Fox Business).
- Independent estimates of how tariffs would affect federal revenue, consumer prices, and local industries.
Full reporting sources: Fox Business; CPA Practice Advisor; Congress.gov (FairTax Act of 2025).
