Can Trump’s Tariffs Really Replace Federal Income Tax? Plan, Math and Legal Fights as of December 7, 2025

President Donald Trump spent the past ten days escalating one of the boldest promises of his second term: that soaring tariff revenue will soon let Americans pay little — or even no federal income tax.

He has floated the idea in a Thanksgiving call with troops, a December 2 Cabinet meeting, and subsequent media appearances, while also touting future $2,000 “tariff dividend” checks and the “largest tax refund season ever.” ^[1]

Economists, tax analysts — and now major corporations and the courts — are urgently asking a different question:

Can tariffs really fund the U.S. government and replace the income tax, or is this political fantasy?

Here’s where the proposal stands as of December 7, 2025, and what new reporting and analysis this week reveal.

What Trump Is Proposing: “Not Even Have Income Tax to Pay”

The core of Trump’s message is simple and sweeping:

Use massive tariff revenue to cut, and potentially eliminate, the federal individual income tax.
Send Americans rebate-style “tariff dividend” checks, currently framed as $2,000 per eligible adult sometime in 2026.
Use the same revenue to reduce the national debt, all without major spending cuts.

On Thanksgiving Day, in a video call with U.S. service members from Palm Beach, Trump said that over the next couple of years his administration could “substantially” cut income tax and “maybe” cut it out completely, because tariff revenue will be “so large.” ^[2]

At a December 2 Cabinet meeting, he went further, telling reporters that in the “not-too-distant future” Americans might “not even have income tax to pay” because tariff income is “so great” — echoing the same message in an extended gaggle covered by CBS News and Fox Business. ^[3]

The White House argues that:

Trump’s sweeping “Liberation Day” and “reciprocal” tariffs on imports are generating hundreds of billions of dollars.
Future tariff income could reach “trillions,” funding both tax relief and debt reduction.
The cost, they say, will fall primarily on “foreign exporters who rely on the American economy.” ^[4]

At campaign-style events, Trump has folded this promise into a broader “affordability president” message, even as polling shows voters still deeply worried about prices and skeptical of his claims about falling costs. ^[5]

The Math: $195 Billion in Tariffs vs. $2.7 Trillion in Income Tax

The headline problem for Trump’s plan is arithmetic.

According to Treasury data and multiple analyses cited this week by CBS News, Newsweek, ABC’s fact-check and other outlets:

In fiscal year 2025 (ended September 30):
- The U.S. collected about $2.7 trillion in individual income taxes.
- It collected about $195 billion in customs duties (tariffs). ^[6]
Income tax provided more than half of total federal revenue; tariffs contributed roughly 3–8%, depending on the month. ^[7]

Independent analysts say closing that gap is essentially impossible without either:

Brutally high tariffs, or
Massive spending cuts and/or much higher deficits — or both.

The Tax Policy Center (TPC) estimates that Trump’s announced tariffs through November 20, 2025, would raise about $2.3 trillion over ten years (2026–2035), starting with $247 billion in 2026 — equivalent to roughly one-tenth of what the income tax is projected to bring in over the same period. ^[8]

PolitiFact’s analysis this week put the contrast starkly:

Tariff collections so far this year: about $257 billion, with $167 billion attributable to Trump’s second-term tariffs.
Federal income tax revenue in 2024: about $2.4 trillion, more than 14 times as much. ^[9]

To fully replace the income tax, one expert told PolitiFact, tariff receipts would need to balloon to around $2.4 trillion a year — nearly half of all federal revenue — which current and projected tariffs don’t come close to matching. ^[10]

CBS News quoted Tax Foundation economist Erica York calling full replacement “mechanically impossible” without severely harming the economy and exploding the deficit. ^[11]

Who Would Pay More — and Who Would Pay Less?

Trump often frames tariffs as a way to “tax foreign nations” instead of American workers. Economists largely disagree.

Tariffs act like a consumption tax

Tariffs are, in practical terms, a type of sales tax on imports:

U.S. importers pay the tariff at the border.
They usually pass much of the cost on in the form of higher prices on consumer goods — from clothes and toys to electronics, auto parts and groceries. ^[12]

The Tax Policy Center treats tariffs like excise taxes: the burden falls mostly on households and domestic buyers, not on foreign governments. ^[13]

Multiple estimates, including from the Tax Foundation, suggest Trump’s tariff regime amounts to an average tax increase of roughly $1,200 per U.S. household in 2025, rising further in 2026 as newer rounds of duties phase in. ^[14]

Income tax is progressive; tariffs are flat or regressive

By contrast, the federal income tax is highly progressive:

The top 10% of earners pay about 72% of all individual income taxes, according to Tax Foundation data highlighted by CBS News. ^[15]
Many low-income households pay little or no income tax and even receive net refunds via credits.

Tariffs don’t work that way. They’re close to flat, and in practice often regressive, because lower-income households spend a larger share of their income on imported consumer goods. ^[16]

That means:

Cutting income tax across the board, financed by tariffs, heavily favors higher earners.
CBS’s experts calculated that a hypothetical 3% across‑the‑board income‑tax cut funded by tariffs would mainly benefit the top 10%, because those are the people who currently shoulder almost all of the income-tax burden. ^[17]

As one Newsweek source put it, the idea that tariffs could “fully replace income taxes” while preserving current spending is viewed by economists as “a mathematical impossibility.” ^[18]

The Laffer & Moore Argument: “Tariffs Can Make Work Pay Again”

If economists across the spectrum are skeptical, why does this idea keep resurfacing on the right?

A key intellectual push is coming from supply‑side economists Arthur Laffer and Stephen Moore, long‑time Trump allies.

In a Wall Street Journal opinion piece titled “Tariffs Can Make Work Pay Again”, published on December 3, they argue that: ^[19]

Tariff revenue could be used to cut payroll taxes (the 15.3% combined Social Security and Medicare tax on wages).
A temporary 5‑percentage‑point cut in the payroll tax, financed by tariffs, would act like an instant pay raise, reduce labor costs and boost productivity.
Shifting the tax burden toward imports and away from work could, in their view, increase labor supply and growth.

Importantly, even their argument typically involves partial replacement — trading some income or payroll tax for some tariffs — rather than actually funding the entire federal government through tariffs alone.

Still, the op‑ed has been heavily promoted by conservative media and by Laffer and Moore themselves on social platforms, helping legitimize the idea within Republican circles and giving Trump an intellectual frame for his rhetoric. ^[20]

Legal Storm: Supreme Court and Costco Challenge Tariff Powers

Even before you get to the math, Trump’s plan has a huge legal problem: the tariffs themselves may not survive.

The IEEPA challenge and Learning Resources v. Trump

Trump’s core “Liberation Day” tariffs — a minimum 10% duty on nearly all imports, with higher rates on strategic goods — were imposed under the International Emergency Economic Powers Act (IEEPA), a 1977 law usually used for sanctions, not taxes. ^[21]

A consolidated Supreme Court case, Learning Resources v. Trump (and related V.O.S. Selections v. Trump), asks:

Whether IEEPA actually authorizes the president to impose such broad tariffs, and
If it does, whether that is an unconstitutional delegation of Congress’s taxing power under Article I. ^[22]

Reports from oral arguments in November say several conservative justices were openly skeptical, with Chief Justice John Roberts noting that imposing taxes on Americans has “always been a core power of Congress.” ^[23]

Costco’s lawsuit: $195 billion at stake

On top of that, Costco filed a major lawsuit on December 2 in the Court of International Trade. The company claims the White House:

Misused IEEPA to impose what are essentially taxes, not emergency sanctions, and
Could leave importers unable to get refunds even if the Supreme Court eventually rules the tariffs unconstitutional, because of the way Customs “liquidates” duties after 314 days. ^[24]

The Guardian reports that:

Tariff collections jumped to $195 billion in FY 2025, up from $118 billion in 2024.
Costco, which relies heavily on imports from China, Mexico and Canada, wants CBP to halt finalization of duties and to refund unlawful tariffs already paid. ^[25]

Think tanks like the Cato Institute warn that if the Court strikes down the tariffs, the administration could have to refund roughly $100 billion or more in tariff revenue — erasing much of the funding Trump is counting on for tax cuts or dividend checks. ^[26]

The $2,000 “Tariff Dividend” Checks: Hype vs. Reality

Alongside talk of ending income tax, Trump has repeatedly promised to send Americans a $2,000 “tariff dividend” — essentially a stimulus check funded by tariffs.

What Trump says

In a Truth Social post and multiple public appearances since mid‑November, Trump has said tariffs are generating so much money that a “dividend of at least $2,000 a person” could be sent to most adults, excluding very high earners. ^[27]
At the December 2 Cabinet meeting, he said 2026 would bring the “largest tax refund season ever” and again promised “a nice dividend to the people” out of tariff revenue, while also paying down debt. ^[28]

What’s actually approved?

So far, nothing.

Fact‑checkers and personal finance outlets across the spectrum — from Fox 5 DC to Kiplinger, Blockonomi and Parameter — all emphasize:

Congress has not passed any law authorizing new federal stimulus checks in December 2025 or 2026.
The IRS has not scheduled any new payments tied to a tariff dividend.
Any such program would require new legislation, not just presidential announcements. ^[29]

CBS News reports that sending a one‑time $2,000 payment to U.S. households would cost between $300 and $600 billion, far more than current annual tariff collections — and that’s before you even talk about eliminating the income tax. ^[30]

New Analysis This Week: “Complete Fantasy” and “Not Feasible at All”

Several fresh pieces of analysis published in the last few days sharpened the expert consensus.

Newsweek: “Literally impossible” for tariffs to replace income tax

In a December 6 Newsweek article, tax scholars gave blunt assessments: ^[31]

Alan Wolff of the Peterson Institute called it “literally impossible” for tariffs to fully replace income-tax revenue.
NYU tax law professor Daniel Shaviro described the idea as “not feasible at all.”
Economist Kimberly Clausing said that even if tariffs were raised to their revenue‑maximizing limit, they would bring in less than $400 billion a year — roughly one‑sixth of current income-tax revenue.

Clausing also noted that widely touted trillions in foreign investment “promised” to the U.S. under Trump’s trade deals are not cash flows into the Treasury and are far smaller than claimed — more like $1.5 trillion in loosely defined commitments than the $20‑plus trillion sometimes cited. ^[32]

ABC / AP Fact Focus: Claim is flatly false

An Associated Press “Fact Focus” article, carried by ABC News, concluded that the claim tariff income can eventually replace federal income taxes is false, pointing out that: ^[33]

Individual income taxes made up over 50% of federal revenue last year.
Tariffs accounted for just 3.7% in FY 2025 and under 8% in the first month of the current fiscal year.
Even with Trump’s historically high tariff rates, revenue “comes nowhere near” what the income tax provides.

A senior adviser at NYU’s Tax Law Center summarized the consensus: it’s “not possible” mathematically or economically, and experts “from a range of different perspectives” agree.

CPA and policy analysts: deficits would explode

A widely circulated syndicated piece in CPA Practice Advisor estimated that eliminating income tax without comparable replacement would increase the annual deficit by roughly $2.3 trillion, pushing it toward $4 trillion a year, or about 13% of GDP. ^[34]

Given that the government already runs large deficits even with current income-tax revenue, analysts say Trump’s plan would require either:

Historic levels of borrowing, or
Deep cuts to Social Security, Medicare, defense, and other major programs — cuts Trump has so far ruled out rhetorically.

Political Reality: Big Promise, Small Path

Even if the Supreme Court upholds Trump’s tariff authority and the economy weathers higher import prices, there’s still the question of Congress.

Rewriting the tax code to abolish or sharply cut the income tax would require major legislation.
Trump’s allies control Congress narrowly, and some Republicans are already balking at a $2,000 tariff dividend, with figures like Sen. Ron Johnson saying the U.S. “can’t afford” such a payout. ^[35]

Meanwhile, Trump’s broader economic narrative is under strain. A Washington Post analysis on December 6 noted that voters remain unconvinced by his claims that prices are falling and that he is the “affordability president”; 62% disapprove of his economic performance in recent polling. ^[36]

Strategists in both parties say that if Americans start linking higher prices directly to Trump’s tariffs, the politics of an income‑tax‑for‑tariffs swap could quickly become toxic.

What to Watch Next

As of December 7, 2025, the story is still evolving. Key milestones to watch:

Supreme Court ruling in Learning Resources v. Trump
Expected in spring 2026, this decision will determine whether the IEEPA‑based tariffs that underpin Trump’s revenue claims survive — and whether importers can seek refunds for duties already paid. ^[37]
Costco and other importer lawsuits
Additional challenges could complicate tariff collection and potentially force the administration to return tens of billions in duties, shrinking the pool of money available for any tax cuts or dividends. ^[38]
Formal tax proposals from the White House
So far, Trump’s vision has been delivered mostly via speeches, social posts and interviews. Markets and lawmakers are watching for actual legislative text specifying:
- Which brackets would see income‑tax cuts
- Whether payroll taxes are on the table
- How large and broad any “tariff dividend” would really be
Congressional response and 2026 midterms
With affordability dominating voter concerns, Republicans must decide whether to fully embrace Trump’s high‑tariff, low‑income‑tax agenda — or temper it with more conventional, budget‑neutral tax reform.

Bottom Line

Trump’s pitch — no more income tax, fat tariff-funded checks, and shrinking debt — is politically potent, especially for voters squeezed by high prices and weary of the IRS.

But as of today:

The numbers don’t add up: tariffs are a small, regressive tax base compared to the vast, progressive income tax.
The legal foundation is shaky, with the Supreme Court weighing whether Trump’s emergency tariff powers are constitutional at all.
The political path is narrow, requiring big votes in Congress and risking backlash if consumers clearly feel tariff‑driven price hikes.