At the start of the summer, when former President Donald J. Trump visited Republicans on Capitol Hill, he hinted at a vision for a vastly different tax system than what the United States has employed for decades.
Rather than taxing Americans on the money they earn at their jobs and on their investments, Mr. Trump instead suggested imposing a broad tax on the goods that Americans buy from abroad. In his view, such tariffs could replace income taxes as the main source of federal revenue.
The idea, briefly floated behind closed doors, seemed to fizzle, and Mr. Trump did not publicly repeat it as experts questioned whether such a model would even be possible. But in the weeks since, Mr. Trump has floated ideas that, taken together, would fundamentally change the way Americans are taxed, eroding the income tax while embracing expansive tariffs as a way to raise federal revenue.
Two of his proposals — no taxes on tips and no taxes on overtime — could open gaping loopholes in the income tax, luring Americans of all stripes to change how they earn money to avoid taxes. He has also called for ending taxes on Social Security benefits and fully restoring a costly deduction for state and local taxes — all on top of a push to extend tax cuts he signed into law in 2017, many of which expire after next year.
“The joke is maybe over the next two weeks he’ll get all the way there, and he’ll have fully eliminated the income tax with all of his proposals,” said Erica York, an analyst at the Tax Foundation, which generally favors lower taxes. “All of these little policies we’re seeing is one industry, one type of income at a time working his way toward that.”
His ideas — if they all became law, far from a sure thing in Washington — would in effect move the United States closer to a taxation system used in many other countries. Most advanced economies, including Canada, Germany and Japan, collect value-added taxes, essentially a national sales taxes on goods and services. The United States is unique for not having such a tax. Many economists generally support so-called consumption taxes, which they view as an efficient and hard-to-evade way of collecting money for the government.
Still, several of those economists do not view Mr. Trump’s proposals as the right way to reorient the country’s tax system, arguing that they could explode the deficit, spur trade fights and disproportionately burden lower-income Americans. That’s because those Americans, who have less money to spend, use a larger share of their overall income to buy goods that would probably get more expensive under Mr. Trump’s tariffs.
“Whether he knows it or not, or intends it or not, it’s a shift from taxing income to taxing consumption in some fashion,” Michael Graetz, a tax scholar at Columbia Law School, who has argued that the United States should adopt a consumption tax. He still takes issue with Mr. Trump’s proposals.
“If you wanted to do a consumption tax, you’d be hard pressed to find an economist who’s not working for the Trump campaign who would say you should start with tariffs,” he said.
Mr. Trump’s anti-tax crusade, which has played out in social-media posts and pithy slogans offered up at political rallies over the course of the summer and fall, is a synthesis of several different ideas animating the former president’s approach to economic issues, according to people who advise him. Among them is faith in the raw political appeal of promising tax cuts, as well as a belief that the cost of tariffs falls on foreigners, not Americans, though economic studies have repeatedly found that U.S. businesses and consumers ultimately foot the bill.
Another dynamic is a view among some of Mr. Trump’s advisers that his earlier round of tax cuts will not be enough to revitalize an economy that they believe is struggling after years of elevated inflation. Even though inflation has cooled and the economy remains strong, that thinking has motivated Mr. Trump to seek deeper tax cuts, according to these people.
Some advisers have discussed the possibility of suspending the payroll taxes that fund Social Security and Medicare as a form of stimulus, which Mr. Trump attempted to do in 2020. Like Mr. Trump’s plan to exempt Social Security benefits from income taxes, suspending payroll taxes could darken the already grim financial outlook for the retirement programs.
Karoline Leavitt, a spokeswoman for Mr. Trump, said the former president’s promises to cut taxes stood in contrast with Vice President Kamala Harris’s plans to raise taxes on corporations and high-income Americans. “If Americans want less taxes and more money in their pockets, the only option is to vote for President Trump,” she said.
A longtime conservative goal
The United States has collected income taxes since the ratification of the 16th Amendment in 1913. Today, those taxes make up the vast majority of money that flows into the Treasury.
About 50 percent of revenue comes from individual income taxes, which Americans owe on their wages, capital gains and other forms of income. Another 35 percent of federal revenue derives from payroll taxes, which workers and employers pay on wages, and about 9 percent comes from corporate income taxes. Tariffs now make up about 2 percent of federal revenue, according to the White House.
But many conservative economists, including several with Mr. Trump’s ear, have long harbored antipathy toward taxing income. They believe that an income tax reduces the amount of money people can save and then invest to grow the economy. Something like a value-added tax, a tax at each stage of production, would instead tax spending and give an incentive for people to save, the thinking goes.
To several economists in Mr. Trump’s orbit, charging a tariff on all imported goods would move the United States toward a consumption tax. Arthur Laffer, who has guided conservative thinking about tax policy for decades, has pushed for a version of a consumption tax and for the United States to adopt a flat tax — which charges the same tax rate on all income. That would mark a shift from the current progressive, marginal tax system, which taxes higher levels of income at higher rates.
“If I have influence in the second term, we can move in that direction very easily,” said Mr. Laffer, who gives Mr. Trump advice on tax policy. In 2019, Mr. Trump awarded Mr. Laffer the Presidential Medal of Freedom, the nation’s highest civilian honor.
Project 2025, a conservative policy blueprint that Mr. Trump has tried to distance himself from, calls for the creation of a consumption tax to replace the income tax. That reflects a parallel effort on Capitol Hill, where lawmakers have for decades introduced legislation that would end all income taxes, including payroll taxes and taxes on capital gains, and replace them with a national sales tax of 23 percent. (The bill would also abolish the Internal Revenue Service.)
Budget experts have puzzled over the exact consequences of Mr. Trump’s promises to not tax tips and overtime pay. But many worry that the policies would encourage millions of Americans to change how they are paid so they earn more in tax-free tips and overtime, a tax-dodging gold rush that could cost the government hundreds of billions.
Steve Moore, a conservative economist who advises Mr. Trump, said the former president does not see his plan as a consumption tax because he does not believe that tariffs are borne by American consumers and businesses. To be sure, tariffs, which only tax imported goods and can invite retaliation, do not work the same way as typical consumption taxes, which apply to both foreign and domestic products.
Still, Mr. Moore added that efforts to create a consumption tax in the United States have often faced resistance, making smaller steps important. “The way to do it is through incremental steps that get you more toward a consumption tax,” he said.
Ms. Harris has blasted Mr. Trump’s tax proposals, labeling his plans for wide-ranging tariffs a “national sales tax” that would raise prices for many Americans.
Still, some Democrats, including the former House speaker Nancy Pelosi of California, have in the past signaled support for a consumption tax, given the amount of money it can raise to finance the federal government. Scholars like Mr. Graetz have worked on other tax changes that would prevent low-income Americans from bearing the brunt of the new system, a key liberal concern, and keep the tax system progressive overall.
“It is possible to design a consumption tax that is relatively progressive by rebating families some portion of the tax increase on consumption, but Donald Trump has not proposed that,” said Brendan Duke, the senior director for economic policy at the Center for American Progress, a liberal think tank.
A key split between conservative and liberals over a consumption tax is whether it should replace an income tax — of if it would exist in addition to an income tax. Mr. Trump’s vision is to degrade the income tax, effectively forcing the United States to rely on tariffs and debt to fund the government.
But some conservatives, like Casey Mulligan, a former White House economist under Mr. Trump, have opposed consumption taxes because of how successful they are at raising money. The Congressional Budget Office estimated in 2022 that a 5 percent value-added tax imposed on a broad base of goods and services could raise more than $3 trillion over 10 years
“The reason I’m against it is the consumption tax is so good at getting revenue,” Mr. Mulligan said. “I’m not sure I want our Treasury to be so flush.”
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