Trump plans the abolition of the IRS and wants to introduce tariffs

Trump plans the abolition of the IRS and wants to introduce tariffs

Nobody wants to pay taxes, and almost every American has a dislike of the IRS. But as the saying says, the only certainty in the life of death and taxes are. This means that the IRS will remain in the future.

a controversial proposal

that may not be quite true, but Commerce Minister Howard Lutnick believes. "Donald Trump has announced the External Revenue Service and his goal is very simple: to abolish the Internal Revenue Service and have all outsiders paid," said Lutnick on Wednesday evening at FOX News. In other words, America will take so much money from President Donald Trump's customs plan that the Americans no longer have to pay income taxes.

The challenges of the plan

that sounds promising, but is associated with many problems. America achieves around $ 3 trillion through income taxes every year and also imports goods worth around $ 3 trillion. This means that the tariffs should be at least 100 % on all goods produced abroad in order to replace income taxes, explains Torsten Slok, chief economist at Apollo Global Management, in a message to investors on Thursday.

The economic consequences

But the replacement of these tax incubators is not as easy as to double everything that comes to America. If you remember the basics of the economy, demand decreases with increasing prices. Walmart announced on Thursday morning that the company with This year Americans in terms of high prices and tariffs.

price increases and consumer demand

The government should therefore find the right point to reconcile its needs with consumer demand. This could result in significantly higher prices. "The problem is that it is unclear what happens to the sale when all imported products rise in price," said Slok. "Since higher prices lead to lower sales figures, tariffs of up to 200 % on all imported goods could be necessary so that the total revenue from tariffs replace income taxes."

a drastic price increase?

This means that we may talk about a quadrupling of prices for all imported goods: cars, electronics, medication, clothing, shoes, energy - whatever. Even if consumers were willing to accept higher prices in exchange for zero income taxes, the plan faces another potential problem. One of the reasons for Trump's tariffs is to encourage companies to produce in America. Should this be done on a large scale and the imports go back considerably, where would America get his income from?

The role of corporate taxes

Corporate taxes could help compensate for part of the deficit. But the taxes of companies only make up 6 % of the total US tax revenue compared to 41 % of income taxes of individuals, according to the tax foundation . And Trump plans to lower the corporate tax rate.

Trump's customs policy

So don't be too optimistic that your part of Uncle Sam suddenly disappears. Nevertheless, Trump continues to rely on tariffs. On Wednesday evening, he explained that his government is considering a custom of 25 % of wood, in addition to tariffs on cars, chips, medication and possibly others, after a review period is expected to end on April 1. He also suggested that there should be counter -duties dollars for dollars. In the next week, 25 % tariffs will come into force on all goods from Canada and Mexico, and it has already inserted tariffs on steel, aluminum and a 10 % inch on all goods from China.

The future of external Revenue Service

For a little more than a month, Trump's concept of the "External Revenue Service" has been circulating. The cleverly named new government position for the first time in a Post five days before his amalge on. She was mentioned in Trump's inaugural speech and was contained in one of the first decrees that Trump signed on the first day of his term.