According to Cointelegraph, U.S. President Donald Trump has proposed a plan to replace federal income taxes with tariffs, potentially saving the average American at least $134,809 over their lifetime. Research from accounting automation company Dancing Numbers suggests that these savings could increase to $325,561 per person if state-level wage-based income taxes are also eliminated. The states expected to benefit the most from this tax relief include New Jersey, New York, Connecticut, Illinois, and Massachusetts.
Punit Jindal, founder of Dancing Numbers, indicated that Trump's plan might be preceded by a 20% 'DOGE Dividend' tax refund, which would provide immediate tax savings as a preliminary measure before a complete federal tax repeal. This initiative aims to offer minor tax relief and stimulate asset prices as investors reinvest their savings into the markets. Such tax cuts could also help counterbalance any potential increase in the cost of goods resulting from reciprocal trade tariffs and potential trade conflicts.
President Trump initially proposed the idea of eliminating federal income tax in October 2024, suggesting that the revenue could be replaced by taxes on imported goods. During an appearance on the Joe Rogan Experience, Trump referenced the 19th-century U.S. economy, which was largely funded by tariffs before the establishment of permanent income taxes. In January 2025, Howard Lutnick, who was confirmed as commerce secretary in February 2025, supported the idea of replacing the Internal Revenue Service with an 'external revenue service.' Lutnick emphasized the historical success of tariffs in protecting American workers from unfair trade practices and criticized politicians for their fiscal management.
The proposal has sparked discussions about its potential impact on the economy, with some experts suggesting that tax cuts could lead to increased market activity as individuals reinvest their savings. However, there are concerns about the possible rise in consumer goods prices due to trade tariffs, which could offset some of the benefits of the tax cuts. The plan remains a topic of debate as the administration considers its implementation and potential effects on the U.S. economy.