The Problem with “Replacing” Income Taxes

Critics of Trump’s proposal have estimated that tariffs on imports would need to be set at about 70% to generate the same amount of revenue collected by the individual income tax. This is much higher than tariff increases of up to 20 percent on all imported goods and 60 percent on Chinese imports, proposed by Trump during the campaign. Critics believe that a tariff increase of around 70 percent would not be feasible, because it would significantly raise import prices and slash US foreign trade, including exports. Domestic consumers would bear the brunt of the tax hike while tariff revenues would decline in line with imports.