Saturday, Jun. 29, 2024
Would replacing the income tax with higher tariffs help ‘struggling Americans’?
Low-income Americans, who pay little or no income tax, wouldn’t gain much in savings if the income tax were eliminated. On the other hand, high tariffs would increase the price of goods, financially burdening those already struggling.
Poorer Americans, who spend a higher portion of their income on goods, would be disproportionately impacted by the switch. Economists have called Trump’s proposal to replace the income tax with steep tariffs regressive: “It would shift the tax burden away from the well off, substantially increasing the tax burden on the poor and middle class,” according to the nonpartisan Peterson Institute for International Economics.
An analysis by the liberal think tank Center for American Progress found that replacing the income tax with tariffs would effectively raise taxes for the bottom 90% of households and reduce the income of the bottom quintile by 25% while increasing the income of the top 1% by 20%.
This fact brief is responsive to conversations such as this one.
Sources
- Tax Policy Center How does the federal tax system affect low-income households?
- Peterson Institute for International Economics Can Trump replace income taxes with tariffs?
- Tax Foundation Five Things to Know about Trump’s Tariff and Income Tax Proposals
- Center for American Progress Comparing Trump’s Haphazard $2,500 Tax Increase to Biden’s Targeted Tariffs
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Fact briefs are bite-sized, well-sourced explanations that offer clear "yes" or "no" answers to questions, confusions, and unsupported claims circulating online. They rely on publicly available data and documents, often from the original source. Fact briefs are written and published by Gigafact contributor publications.
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