Trading Income Tax for Tariffs & Trump’s Fight for You – Top 3 Takeaways – April 16th, 2025 - Driven By Braman Motorcars
Takeaway #1: Would you trade tariffs for income tax?
On Tuesday’s Tax Day, Fox News host Rachel Campos-Duffy interviewed President Trump in an interview perhaps currently best known for Rachel teaching the president how to say “Make America Great Again” in Spanish – which he did with gusto. But the biggest news from that interview was in reference to a question Rachel asked about whether tariffs could replace the federal income tax. Trump’s answer to that question was... “There is a chance that the money from tariffs could be so great that it could replace. You know, in the old days – about 1870 to 1913 the tariffs were the only form of money (revenue to the federal government) and that’s when our country was relatively the richest”. That’s notable for two reasons. First, while it’s well documented and well known that the president has talked about loving tariffs for over 40-years publicly – it's evidently rooted in a historical context as well. One that most notably predates the implementation of the federal income tax. What’s so notable about the year 1913 – is that’s the year the biggest financial mistake our country would ever undertake took place. 1913 was the year that the Revenue Act was passed. Until the Revenue Act, there was no permanent federal income tax in the United States. Instead, to produce revenue for the federal government, the average tariff rate was about 50% which accounted for up to 95% of total federal revenues during the years that President Trump cited. For decades many limited government conservatives have argued for a consumption tax, or tax on goods purchased, as opposed to taxing income and investment. I’m a strong proponent. With that said, the notion that’s Trump’s floating with his answer in the interview is a different version of a similar concept. Rather than a national sales tax on purchases, tariffs could potentially serve that purpose. The effect in the end, if attempted, would be an uneven version of a similar thing – whereby consumers would pay higher prices for imported things, while making Made in the USA items more cost competitive as they’d be tariff free. Realistically do I expect that this will be the path that President Trump and Congressional Republicans take? Probably (almost certainly) not. But...
Takeaway #2: Trump’s answer serves to answer two things
First, whatever the result is, the imposition of tariffs doesn’t appear to be a fleeting thing. At a minimum I could see how they may be used to help offset revenue loss to the federal government from the expansion of the Trump tax cuts to include overtime and “no tax on tips” (and who knows perhaps Social Security and investment income too). An important dynamic to the budget reconciliation process that’s underway to pass the Trump agenda in Congress, is that budget reconciliation can only be used if it’s determined to be at least revenue/deficit neutral to the federal government. Even if Trump doesn’t end the federal income tax with tariffs, it may be the case that he limits what’s subjected to federal income tax with the use of tariffs. That dynamic is worth watching. Second, would you trade tariffs for income taxes? Yes please. Even if it’s just a partial thing. The only more regressive, and for that matter oppressive, tax than an income tax is property taxation...and that’s something we have an opportunity to fix in Florida right now.
Takeaway #3: Do you feel like President Trump is fighting for you?
At a certain level we’d all like to pretend that opinion polls don’t matter but somewhere along the way we don’t like what they have to say. However, the reality on the ground is that opinion polls, like them or not, do matter to the governing process. Especially as you have certain fickle members of congress paying attention to which way the wind blows as to how their vote on say President Trump’s agenda goes. With next to no margin for GOP defections in the House to first craft and second to pass Trump’s desired BBB (Big Beautiful Bill), Trump’s approval ratings may prove to be an important thing (whether they should be or not). So, here’s an interesting thing. There have been three nationally accredited polls taken of President Trump’s approval rating with samples that have been taken completely after the implementation of the tariffs last Wednesday. The result is that President Trump’s approval rating is positive in all three with an average net positive approval rating of about 4-points. Of the preceding nine approval polls taken, Trump’s rating was only positive in one, and that was only by a point. It’s an interesting thing to see that even after the trade war roiled the financial markets, and after the tariffs had begun to take effect, Trump’s ratings began to rise. That’s certainly not what the mainstream media was or is expecting to see. That’s absolutely not what the Left wants to see. I can’t help but to think that the average American is taking a look at what’s happening here and thinking that finally there’s someone fighting for me. There aren’t other particularly viable explanations.