Could Trump Tariffs Mean 40 Percent Tax Cut?

The Trump administration’s increased tariffs have given the government billions in extra revenue already, according to the Treasury Department.

From April 1-28, the Treasury Department reported $16.5 billion in tariff collections, compared to $9.6 billion in March, an increase of 72%. So not only are the tariffs driving companies to open offices and factories in the U.S. and opening foreign markets to our products and services, but they are bringing in massive revenue to our Treasury.

Remember that since colonial times, the tariff — not the income tax — has been the financial staple of the federal government.

Trump’s tariffs could, in fact, generate enough revenue to permit a huge cut in the personal income tax. Indeed, President Trump is increasingly replacing the Internal Revenue Service, the IRS, with a new External Revenue Service, the ERS.

To fathom how fundamental this transformation may be when it is fully implemented, let's do the math.

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Donald Trump’s tariff deals could allow a cut in the personal income tax in the U.S. of up to $1 trillion. Americans now pay $2.4 trillion of personal income taxes, so we are talking about a tax cut of potentially 41%.

Just add up the numbers:

• Overall, Trump proposes a 10% tariff on the $4.1 trillion we import from the rest of the world. Revenue: $400 billion
• From Canada, he calls for an additional 25% tariff on $413 billion of imports. Revenue: $100 billion
• From Mexico, he proposes a 25% tariff on $474 billion of imports. Revenue: $120 billion.
• From China, he proposes a tariff of 125% on $438 billion of imports. But let's assume he has to settle for 60%. Revenue: $250 billion.
• From the EU, he proposes a 25% tariff on $605 billion of imports. Revenue: $150 billion.

All of these tariff increases combined would generate over $1 trillion of revenues — enough to cut personal income taxes by 40 percent.

Of course, there would be some retaliation from other countries, but our overall balance of trade was almost $1 trillion in the red last year, so the retaliatory tariffs would have to approach 100% to wipe out most of this gain.

So the Trump tariffs could herald an entirely new era for the American economy. The stimulative effect of one-third lower tax rates would be incredible. Wealthy people from all over the world would line up to come to America … legally.

And we would transform our country into a low-tax paradise.

Economists have long pined for the day when our tax system would be based on consumption, not on income.

Tariffs are a great way to achieve this purpose. We could cut the tax on income and use the tariff revenues, a form of national sales tax, instead. We would be taxed based on what we spend on foreign products and services, not on what we earn ourselves.

If we chose to pay less in taxes, just buy less in foreign products.

With our increasing energy independence — that will be even greater under Trump — we can impose self-regulation to hold down our tax burden.

These changes would be monumental and would transform the American economy.

Dick Morris is a former presidential adviser and political strategist. He is a regular contributor to Newsmax TV. Read Dick Morris' Reports — More Here.