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How Trump Could Upend Taxation in America

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How Trump Could Upend Taxation in America

With slogans and in social-media posts, the former president has dribbled out ideas that, together, would fundamentally change how taxes are collected in the U.S.

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Donald Trump, in a blue suit and red tie, walks out of a blue curtain flanked by two American flags and greets a crowd.
Former President Donald J. Trump has suggested imposing a tax on the goods that Americans buy from abroad. In his view, tariffs could replace income taxes as the main source of federal revenue.Credit…Doug Mills/The New York Times

Andrew Duehren

Andrew Duehren writes about tax policy in Washington.

Published Sept. 22, 2024Updated Sept. 23, 2024

At the start of the summer, when former President Donald J. Trump visited Republicans on Capitol Hill, he hinted at a vision for a vastly different tax system than what the United States has employed for decades.

Rather than taxing Americans on the money they earn at their jobs and on their investments, Mr. Trump instead suggested imposing a broad tax on the goods that Americans buy from abroad. In his view, such tariffs could replace income taxes as the main source of federal revenue.

The idea, briefly floated behind closed doors, seemed to fizzle, and Mr. Trump did not publicly repeat it as experts questioned whether such a model would even be possible. But in the weeks since, Mr. Trump has floated ideas that, taken together, would fundamentally change the way Americans are taxed, eroding the income tax while embracing expansive tariffs as a way to raise federal revenue.

Two of his proposals — no taxes on tips and no taxes on overtime — could open gaping loopholes in the income tax, luring Americans of all stripes to change how they earn money to avoid taxes. He has also called for ending taxes on Social Security benefits and fully restoring a costly deduction for state and local taxes — all on top of a push to extend tax cuts he signed into law in 2017, many of which expire after next year.

“The joke is maybe over the next two weeks he’ll get all the way there, and he’ll have fully eliminated the income tax with all of his proposals,” said Erica York, an analyst at the Tax Foundation, which generally favors lower taxes. “All of these little policies we’re seeing is one industry, one type of income at a time working his way toward that.”

His ideas — if they all became law, far from a sure thing in Washington — would in effect move the United States closer to a taxation system used in many other countries. Most advanced economies, including Canada, Germany and Japan, collect value-added taxes, essentially national sales taxes on goods and services. The United States is unique for not having such a tax. Many economists generally support so-called consumption taxes, which they view as an efficient and hard-to-evade way of collecting money for the government.

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Source: https://www.nytimes.com