President Suggests Tax Relief as Americans Worry About Tariff Price Increases

TLDR

• President Trump suggested reducing or eliminating income taxes for those making under $200,000 to offset tariff impacts
• Trump claims tariffs are creating jobs and new manufacturing facilities
• 75% of Americans expect tariffs to raise consumer prices according to recent polls
• The administration has implemented 10% baseline tariffs with higher “reciprocal” rates for specific countries
• Trump previously suggested replacing federal income tax with tariff revenue, calling it the “External Revenue Service”

President Trump recently proposed cutting income taxes for Americans making less than $200,000 per year to help offset the impact of his new tariff policies. The suggestion came via a post on his Truth Social platform on Sunday, April 27, where he stated that income taxes could be “substantially reduced, maybe even completely eliminated” once tariffs are fully implemented.

“When Tariffs cut in, many people’s Income Taxes will be substantially reduced, maybe even completely eliminated,” Trump wrote. He emphasized that the focus would be on people earning less than $200,000 annually.

This tax cut proposal comes as polls show growing public concern about the economic effects of the administration’s tariff policies. A recent Associated Press-NORC Research poll found that three in four Americans expect the tariffs to increase consumer prices.

Trump has defended his tariff strategy, claiming it is already creating jobs. “Massive numbers of jobs are already being created, with new plants and factories currently being built or planned. It will be a BONANZA FOR AMERICA!!!” he wrote in the same social media post.

The Tariff Implementation

Since taking office in January, Trump has announced several waves of tariffs. The basic structure includes a 10% baseline tariff on all imported goods with higher “reciprocal” tariffs targeting specific nations.

Many of the country-specific tariffs are scheduled to take effect in July, following a 90-day pause intended to give nations time to negotiate trade deals with the United States. However, tariffs on goods from China, Mexico, and Canada have already gone into effect.

Global levies on automobiles, steel, and aluminum have also been implemented, causing disruption in global markets. These early tariffs offer a preview of the broader economic impacts that may come when the full tariff regime is in place.

Public opinion appears to be turning against these policies. Beyond the AP poll showing concerns about price increases, an NBC News Stay Tuned survey released Sunday found that at least 60% of Americans disapprove of Trump’s handling of trade, tariffs, and inflation.

The “External Revenue Service” Vision

Trump’s latest comments align with previous statements suggesting he might replace federal income tax entirely with revenue generated from import tariffs. He referred to this concept as the “External Revenue Service” in his social media post.

The president first floated this idea during an October 2024 appearance on the Joe Rogan Experience podcast while on the campaign trail, though he provided few specific details at that time.

Trump has suggested that replacing income tax with tariff revenue would return the US to an era of prosperity similar to the Gilded Age of the 19th century, when the country did not have a permanent federal income tax.

According to research by accounting automation company Dancing Numbers, eliminating federal income tax could save the average American $134,809 in lifetime tax payments. The same research suggested that if other wage-based income taxes were also eliminated, savings could reach as much as $325,561 per American.

However, economists have questioned whether tariffs alone could generate enough revenue to replace income taxes. The feasibility of such a dramatic shift in tax policy remains a topic of debate among financial experts.

Trump’s Republican allies in Congress are determined to pass his legislative agenda, including extending his 2017 tax cuts, as they return to Washington.

The administration’s tariff policies have faced criticism from financial analysts who argue that protectionist trade approaches hurt capital markets. The frequently changing rhetoric surrounding these policies has contributed to increased volatility in the US stock market and rising US bond yields.