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The President of the United States, Donald Trump, recently stated that federal income taxes could be “notably lowered” or possibly abolished once the tariff system is fully implemented.
In a post on Truth Social dated April 27, Trump asserted that the emphasis of the alleged tax reductions would be on individuals earning below $200,000 annually.
The US leader also mentioned that the “External Revenue Service” — referring to funding the federal government solely through import tariffs rather than the existing method of tax collection via the Internal Revenue Service (IRS) — is coming to fruition.
Abolishing the federal income tax would likely act as a favorable driver for asset values, including cryptocurrencies, as the rise in disposable income is expected to partially redirect into productive investments. However, this stimulating effect is not assured.
Related: If Trump dismissed Powell, what would affect crypto?
Analysts and markets express skepticism over Trump’s plan
Trump had earlier proposed the idea of abolishing the federal income tax during an October 2024 episode of the Joe Rogan Experience, despite offering minimal concrete details on the proposal while campaigning.
The US President indicated that substituting the federal income tax with revenue generated from import tariffs would usher the US back to a period of affluence reminiscent of the Gilded Age in the 19th century, a time when the US did not have a persistent federal income tax.
Research carried out by accounting automation firm Dancing Numbers discovered that Trump’s initiative could save the average American $134,809 in lifelong tax contributions.
Dancing Numbers also noted that tax savings could potentially reach $325,561 per American if other employment-based income taxes are also eliminated.
On April 2, Trump enacted an executive order inflicting extensive tariffs on all US trading partners, which included a baseline tariff of 10% across all countries and varying “reciprocal” tariff rates for nations with import duties on American products.
Nevertheless, since then, the Trump administration retracted its tariff strategies multiple times, oscillating on tariff rates and the timeline for when the tariff system would be fully implemented.
The shifting discourse by the Trump administration regarding trade policies has intensified fluctuations within the US stock market, led to a surge in US bond yields, and drawn significant criticism from financial analysts who argue that the protectionist trade policies harm capital markets while achieving little else.
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