Donald Trump has suggested that, given the chance, he’ll abolish the federal income tax in favor of a tariff-based federal revenue system. Because the federal government is a behemoth, tariffs won’t provide enough funding, but it’s a wonderful start. There are fair ways to raise money in addition to tariffs and, of course, the federal government must be cut down to size.

The Telegraph reports on Trump’s proposal:

Donald Trump has suggested he could scrap federal income tax if he wins the presidency.

On a campaign stop to a barber shop in the Bronx, the former president was asked if the United States could end all taxation.

In his response, the former president made reference to the country’s economic policies of the late 19th century, when funds from income tax were replaced with new trade tariffs.

“It had all tariffs — it didn’t have an income tax,” Trump told his audience in the Knockout Barbershop.

“Now we have income taxes, and we have people that are dying. They’re paying tax, and they don’t have the money to pay the tax.”

[snip]

But he has claimed that he would introduce tariffs on the imports of foreign goods ranging from 10 per cent to 20 per cent with and a 60 per cent levy on items shipped from China.

Trump has even threatened a 200 per cent tariff on tractor manufacturer John Deere if it moves some jobs to Mexico.

This is a great idea, although there are some points to make.

First, for all those free-marketers having heart attacks, remember that unrestricted free trade is not a good thing for America. Sure, if you’re trading with other first-world countries, it may even out because their standards of living are comparable to ours. However, if you’re trading with third-world countries or, worse, with countries such as China that use government funds to prop up their industrial sector, you destroy America’s industries, as manufacturers move their factories to those countries and retailers buy their products only from those countries. It’s a short-term benefit to the consumer that ends when the markets are flooded with cheap products, but an unemployed nation has no money with which to buy them.

Second, we all know (as does Trump) that tariffs won’t be enough to fund today’s federal government. When only tariffs funded the federal government, it was a small government. Now, we have a grotesquely huge bureaucracy that sucks up vast amounts of American wealth. So, a couple of further points.

First, we need to shrink the federal government, but let’s not fool ourselves into believing that we can go back to a government that consists of the State Department, the Pentagon, the Treasury, and a handful of other things. However, we taxpayers currently fund over 600 federal agencies. My bet is that many can be terminated, either because their mandate ended long ago, meaning they’re doing make-work now, or because they ought never to have been created in the first place. (Suggestion: Start with the Department of Education.)

Second, there are much better was to raise money for the government than the system we have now. One way would be a flat tax. Everyone would pay a 10% tax rate on their income. There would be no deductions or exemptions. There would also be no taxes on dividends, distributions, capital gains, or other investments.

The second way is a federal sales tax. I like this one because you can’t hide income. Everyone buys, so everyone pays. One can argue over what wouldn’t be taxed (i.e., basic foods, housing, and healthcare, perhaps), but everything else would have a 10% sales tax. The more people buy, the more they pay, so the poor person would pay a minute amount while the rich person, who spends a lot, would pay a lot.

The IRS would become obsolete, which is great because it’s expensive and terrifying. Instead, the same merchants who already pay local and state taxes would handle federal sales taxes, too.

Another virtue of a national sales tax is that the cost of goods would be more transparent. Every part in a car, tractor, or house would be taxed. The rest of the price is the actual cost of the product, including the profit to the creator or seller.

The virtue of both these proposed systems (a flat tax or a national sales tax) is that everyone has a stake in the government because everyone is contributing to the treasury. This would drastically decrease the number of people who get more from the government than they pay in.

By the way, if you want to know whether Trump’s proposal—and other conservative economic reforms—would actually work, just look to Argentina.

So, President Trump, I say, “Go for it! Ending federal income taxes is a wonderful way to return wealth to the American people.”

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