In a recent interview, Commerce Secretary Howard Lutnick unveiled President Donald Trump’s ambitious plan to overhaul the federal taxation system by significantly increasing tariff revenues, with the ultimate goal of phasing out the Internal Revenue Service (IRS). Lutnick detailed that the administration aims to implement reciprocal tariffs, potentially generating an estimated $700 billion annually. This substantial revenue influx is intended to eliminate the national deficit, reduce interest rates, and stimulate economic growth.
The strategy involves establishing an external revenue office dedicated to managing income derived from these tariffs, effectively shifting the government’s funding model away from domestic taxation. This approach mirrors the pre-1913 era when tariffs were the primary source of federal revenue before the introduction of the income tax.
Additionally, the administration plans to address tax avoidance by foreign-flagged entities, such as cruise ships registered in countries like Liberia or Panama, which currently evade U.S. taxes. By ensuring these entities contribute their fair share, the government anticipates being able to lower tax rates for American citizens while maintaining a balanced budget.
This policy shift is part of a broader effort to reform the federal taxation system, aiming to reduce the tax burden on American workers and businesses by leveraging international trade revenues.