Former President Donald Trump stood by his idea to end income taxes and substitute them with tariffs in a Friday interview with Joe Rogan, the host of one of the most widely listened to podcasts in the world.
“Did you just float out the idea of getting rid of income taxes and replacing it with tariffs?” Rogan asked the Republican presidential nominee during their three-hour interview. “We’re serious about that?”
“Yeah, sure, but why not?” Trump responded.
“We will not allow the enemy to come in and take our jobs and take our factories and take our workers and take our families, unless they pay a big price. And the big price is tariffs,” the former president added.
A central piece of Trump’s economic pitch to voters is an extensive tax overhaul that includes proposals to erode the income tax system and replace it with a hardline tariff policy.
He has floated eliminating income taxes on tips, overtime pay and Social Security benefits, along with renewing his 2017 tax cuts, which are due to expire in 2025. He has also said he would consider income tax exemptions for firefighters, police officers, military personnel and veterans.
Ending taxes on tipped income, overtime and Social Security alone would cost an estimated $2 trillion over 10 years, according to the nonpartisan think tank Tax Foundation. That cost only grows with the addition of Trump’s other tax exemption proposals.
Trump sees his aggressive tariff policy vision as a way to offset those costs.
He has proposed a 20% tariff on all imports from all countries across the board, with an especially high rate for Chinese imports.
But tax experts and economic analysts do not think Trump’s tariffs would be an adequate counterweight to balance the trillions lost from eliminating income taxes.
“It would not be possible to raise tariffs rates high enough to cover anywhere close to that amount [of income tax revenue], as imports would decline as the tariff rates increased,” Garrett Watson, a senior policy analyst at the Tax Foundation, told CNBC earlier this month.
Watson added that Trump’s tariffs would likely generate an estimated $3.8 trillion in revenue over 10 years compared with the $33 trillion that individual income taxes would bring in over the same period.
On balance, Trump’s overall tax plan including tariffs would expand the deficit by $3 trillion over a decade.
“The math doesn’t work out,” Watson said.
Further, Trump’s tariffs would get paid by U.S. importers, which would increase producer costs and could result in higher consumer prices, just as inflation has begun to cool.
In effect, these tariffs could replace income tax with a kind of new sales tax, shifting the tax burden more heavily onto low-income individuals.
Vice President Kamala Harris has adopted economists’ analysis of Trump’s tariffs as her own campaign talking point.
“It would be a sales tax on the American people,” the Democratic nominee said in an interview with MSNBC’s Stephanie Ruhle in September.
“Doing a 20% tariffs on all imports that he has described, would be a 20% sales tax, in essence, on basic necessities for the average American worker, average American family.”