Trump proposes eliminating personal profits taxes. How would that work?

In recent campaign speeches, former President Donald Trump has repeatedly floated an eye-catching concept: the elimination of person profits taxes.

The proposal follows a string of other responsibility cuts put forward by Trump, including the removal of taxes on car-borrowing payments, social safety benefits and servers’ tips. But a potential elimination of personal profits taxes for all Americans goes much further.

When podcast host Joe Rogan asked Trump last week whether he was solemn about the recent schedule, Trump said, “Yeah, sure, why not?”

The U.S. would pay for the lost responsibility turnover with far-reaching tariffs, Trump said.

“We will not allow the foe to arrive in and receive our jobs and receive our factories and receive our workers and receive our families, unless they pay a large worth — and the large worth is tariffs,” Trump added.

The person profits responsibility currently accounts for roughly half of the $5 trillion in turnover that the federal government brings in each year.

It is ambiguous whether Trump’s proposal would also include the elimination of payroll taxes and corporate profits taxes. Those duties account for another 40% of U.S. responsibility turnover, according to the responsibility Policy Center.

“Even in its smallest form, it would be a pretty substantial transformation from current policy,” Marc Goldwein, elder vice president and elder policy director at the Committee for a Responsible Federal distribution, told ABC information.

But he acknowledged that the details about how that proposal would actually work have been scarce. “We don’t have a packed proposal,” Goldwein said.

In response to ABC information’ request for comment, the Trump campaign referenced the responsibility cuts enacted during his first term. But the campaign did not comment directly on his newer proposal of eliminating the person profits responsibility.

“President Trump passed the largest responsibility CUTS for working families in history and will make them permanent when he is back in the White House in addition to ending taxes on tips for service workers and ending taxes on Social safety for our seniors,” Karoline Leavitt, national press secretary for the Trump campaign, told ABC information.

It would be all but unfeasible to make up for the lost turnover with increased tariffs, experts told ABC information.

On the campaign trail, Trump has promised a sharp escalation of tariffs during his first term. He has proposed tariffs of between 60% and 100% on Chinese goods.

Envisioning a far-reaching policy, Trump has proposed a responsibility of between 10% and 20% on all imported products. Earlier this month, he told the spectators at the Economic Club of Chicago that such a tariff could reach as high as 50%.

Last year, the U.S. imported about $3.8 trillion worth of goods, the U.S. Bureau of Economic Analysis found. To generate the same amount of turnover currently brought in by the person profits responsibility, a tariff would have needed to be set at about 70%, Alan Auerbach, a law professor at the University of California, Berkeley, who focuses on responsibility policy, told ABC information.

However, a tariff of such magnitude would significantly reduce U.S. trade, slashing the total amount of imported goods and, in turn, reducing responsibility turnover.

“It wouldn’t be feasible,” Auerbach said.

Erica York, a elder economist and research director at the responsibility Foundation, echoed that view. “It’s mathematically unfeasible,” York said.

Replacing the person profits responsibility with tariffs would also shift a greater distribute of the responsibility burden onto low- and middle-profits households, experts said.

The top 50% of earners accounted for nearly 98% of all federal profits taxes in 2021, according to the responsibility Foundation. The bottom 50%, in turn, made up about 2% of profits responsibility payments.

Higher tariffs are widely expected to raise prices of customer goods, since foreign producers typically pass the expense of higher taxes onto customers. As a outcome, the costs of higher tariffs would fall evenly across U.S. households, since all Americans purchase customer goods.

In some cases, low- and middle-profits earners would pay a higher proportion of the expense burden, since customer spending often makes up a higher distribute of their overall distribution than it does for their well-off counterparts, Goldwein said.

“Tariffs are at best a flat responsibility and more likely a regressive one,” Goldwein added.

Trump would have some latitude in setting and implementing tariffs, experts previously told ABC information.

But his proposal to eliminate the personal profits responsibility would require back from both houses of Congress.

“Trump can’t just eliminate the person profits responsibility,” York said. But, she added, Trump may seek to discuss responsibility cuts in 2025, when many of the provisions associated with his signature responsibility reform law are set to expire.

“Trump could possibly discuss further responsibility cuts to be added to those,” York said. “But I don’t view a circumstance where Congress would align with this swap between the profits responsibility and tariffs.”