U.S. President Donald J. Trump delivers the primary State of the Union tackle of his second time period to a joint session of Congress within the Home Chamber of the US Capitol in Washington, D.C., U.S.,on Tuesday, Feb. 24, 2026.
Kenny Holston | The New York Instances | Through Reuters
Amid tariff uncertainty, President Donald Trump this week revisited the concept of utilizing tariff income to assist offset revenue taxes.
“As time goes by, I imagine the tariffs paid for by international international locations will, like up to now, considerably change the modern-day system of revenue tax,” Trump mentioned throughout his State of the Union tackle.
It is an thought Trump beforehand floated throughout his 2024 presidential marketing campaign and has revisited whereas in workplace. Federal revenue tax modifications would require Congressional motion.
In the meantime, some coverage specialists say they’re skeptical.
“To place it merely, the maths simply would not work,” mentioned Alex Durante, a senior economist on the Tax Basis, a nonprofit tax coverage suppose tank. The group has analyzed Trump’s tariff coverage, together with whether or not it might change revenue tax.
Whereas tariffs have been the principle supply of U.S. income in the course of the nineteenth century, “the federal government was a lot smaller,” based on Durante.
Throughout that interval, federal authorities spending was barely above 2% of gross home product, in comparison with almost 23% in 2023, based on the Tax Basis’s 2025 evaluation.
White Home spokesman Kush Desai instructed CNBC in an e mail that “President Trump didn’t say that the present tariff regime can change federal revenue taxes. He merely reiterated his perception {that a} sturdy tariff coverage might — because it did for a lot of American historical past — absolutely fund the federal authorities.”
Trump’s remarks got here days after the Supreme Court docket struck down a big chunk of his tariff agenda. The Trump administration Division of Justice faces a massive tariff refund courtroom deadline on Friday. But it surely’s unclear whether or not importers might see refunds from the billions in levies collected through Trump’s larger charges.
How tariff income compares to revenue taxes
“It is utterly implausible that tariffs can change the fashionable system of revenue tax,” mentioned Kimberly Clausing, a nonresident senior fellow on the Peterson Institute for Worldwide Economics, a nonprofit suppose tank. “They’re manner too small.”
Clausing co-authored a 2024 report on the subject, which in contrast the tax base from each varieties of income. In 2023, the U.S. imported $3.1 trillion of products and levied tax on greater than $20 trillion in revenue, she wrote.
Throughout fiscal yr 2025, the federal authorities collected roughly $2.66 trillion from particular person revenue taxes, which was almost 51% of complete income, based on Treasury knowledge. By comparability, customs duties have been about $195 billion the identical yr, the Treasury reported.
As of Jan. 31, the federal authorities has obtained about $924 billion in particular person revenue taxes throughout fiscal yr 2026, which started Oct. 1, in comparison with roughly $118 billion from customs duties, based on the Treasury.
Even when Trump’s tariffs reached a “income maximizing degree” of greater than 40%, the levies would elevate lower than one-fifth of particular person revenue taxes collected, Clausing instructed CNBC.
Tariffs that prime could be “ruinous for the financial system,” with different adverse results, together with fewer imports, which might affect that income, she mentioned.
