— Donald Trump, State of the Union address

“Tariffs will eventually replace the income tax.”

— Donald Trump, State of the Union address

That line got attention for a reason. It’s bold. It sounds revolutionary. And on the surface, it sounds simple: tax foreign goods instead of taxing American paychecks.

The immediate reaction from most economists is: That can’t work.

But here’s the more serious question:

Could a modified version of that idea work — specifically eliminating income taxes for Americans earning under $100,000?

Let’s break it down like adults.

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The Real Objective

Forget the slogan. The practical version of the idea would look like this:

• Eliminate federal income tax for households under $100,000.
• Use tariff revenue to offset the lost tax revenue.
• Keep progressive income tax above $100,000.
• Potentially combine with spending restraint.

This is not the same as eliminating income tax entirely. That’s fantasy math. This is a targeted restructuring.

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Step 1: How Much Revenue Needs Replacing?

Households under $100,000 likely contribute somewhere in the range of:

$600–$800 billion annually in federal income tax revenue.

Let’s call it $700 billion for modeling purposes.

That’s the hole you’d need to fill.

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Step 2: How Much Can Tariffs Raise?

The U.S. imports roughly $3.5 trillion in goods annually.

To generate $700 billion:$$700B ÷ 3.5T = 20$$700B÷3.5T=20

That implies a 20% average tariff on all imports.

But here’s the catch:

• Higher tariffs reduce import volume.
• Businesses change supply chains.
• Consumers adjust behavior.

So in reality, you might need 25–30% average tariffs to net $700 billion after economic adjustments.

That is aggressive — but not mathematically impossible.

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Step 3: Who Actually Pays?

Tariffs are not paid by foreign governments.

They are paid by:

• U.S. importers
• Passed through to businesses
• Passed through to consumers

That means prices would rise on:

• Electronics
• Vehicles
• Clothing
• Building materials
• Some food inputs

In effect, tariffs function like a consumption tax.

So here’s the tradeoff:

You remove income taxes under $100K — but you increase consumer prices across imported goods.

The system shifts from income-based taxation to consumption-based taxation.

That’s not inherently wrong. It’s just a different philosophy.

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Step 4: Who Wins and Who Loses?

A $75,000 household:

• Federal income tax goes to zero.
• They save several thousand dollars per year.
• But they pay higher prices on goods.

If their consumption increases by 5–10% due to tariffs, the net effect could still be positive — depending on spending habits.

A $250,000 household:

• They continue paying income tax.
• They also pay higher prices.
• They likely carry a larger share of the tax burden overall.

So the system becomes:

• Progressive above $100K.
• Consumption-based below $100K.

That’s a structural shift.

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Step 5: Inflation and Economic Shock

A 25% broad tariff would not be painless.

Expect:

• Short-term price spikes.
• Supply chain disruption.
• Retaliatory tariffs from trade partners.
• Market volatility.

You cannot implement something this large without economic friction.

The question is not whether there would be disruption. There would be.

The question is whether policymakers would accept that disruption in exchange for shifting tax burden away from wages.

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Step 6: Could It Be Structured Smarter?

If this were designed seriously — not as a rally line — it would likely require:

1. Gradual phase-in over several years.
2. Targeted tariffs rather than blanket across-the-board rates.
3. Spending reductions to reduce the revenue requirement.
4. Possibly pairing tariffs with a modest national consumption tax (VAT) to stabilize revenue.
5. Border adjustment mechanisms to prevent extreme retaliation.

In other words: a full fiscal restructuring, not just a slogan.

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The Hard Truth

Could tariffs completely replace income taxes?

No. The scale doesn’t work.

Could tariffs help eliminate income taxes below $100,000?

Mathematically — yes.

Politically — maybe.

Economically — disruptive but possible.

The real debate isn’t whether it’s numerically feasible. It is.

The real debate is this:

Are Americans willing to trade:

• Higher consumer prices
  for
• No federal income tax on the first $100,000 of earnings?

That’s a philosophical choice about how we fund government.

Trump’s quote isn’t a detailed fiscal blueprint. It’s a directional statement about shifting the tax base.

Whether that shift is wise depends on your view of:

• Fairness
• Economic efficiency
• Government spending levels
• America’s role in global trade

What it is not — despite what critics say — is pure fantasy. But it would require far more structural reform than a single speech suggests.