Former President Donald Trump has unveiled an ambitious plan to eliminate the Internal Revenue Service (IRS) and completely change the way the U.S. government collects taxes. Instead of taxing American citizens directly, Trump wants to fund the government through tariffs and foreign-sourced revenue. This move could dramatically alter the country’s tax system and how the government operates.
Goodbye IRS, Hello ‘External Revenue Service’
As part of his proposal, Trump plans to replace the IRS with a new agency called the External Revenue Service (ERS). Unlike the IRS, which collects taxes from individuals and businesses, this agency would focus on generating revenue from trade tariffs, duties, and fees on imported goods.
In a statement, Trump criticized the traditional tax system, calling it unfair to American workers. “We are going to stop punishing hardworking Americans and start making foreign countries pay their fair share,” he stated emphatically. If Trump wins re-election, the ERS is expected to launch as early as January 2025.
Higher Tariffs on Foreign Goods
To compensate for the loss of income tax revenue, Trump’s plan includes massive higher tariffs on imports from China, Mexico, and Canada. The overarching goal here is to encourage American businesses to manufacture products domestically rather than relying on cheaper foreign labor.
Critics point out that increased tariffs may lead to higher prices for everyday goods, ultimately affecting American consumers. On the other hand, Trump insists that this strategy will bring back jobs and strengthen the economy by fostering local manufacturing.
IRS Hiring Freeze – What Happens to 90,000 New Agents?
In another significant move, Trump has enacted a hiring freeze at the IRS, halting the onboarding of nearly 90,000 agents who were set to be hired under President Biden’s Inflation Reduction Act. This freeze not only raises questions about tax enforcement but also about the future role of these potential hires.
Trump has even floated the idea of reassigning these agents to border security, arguing that they could help enforce immigration laws. This proposition has generated a considerable amount of controversy, with critics concerned that these agents, originally intended for tax enforcement, may not have the necessary skills or purpose in a border security role.
A New IRS Commissioner – But With a Twist
The proposal also involves Trump nominating former Congressman Billy Long as the next Commissioner of the IRS. Despite being nominated for a position at the IRS, Long has been a long-time advocate for abolishing the agency entirely in favor of a flat tax system.
His nomination has sparked mixed reactions. Supporters believe that he could push for a fairer tax system that reduces paperwork and complexity, while opponents worry about the ramifications of dismantling the IRS without a solid, alternative strategy in place.
What Happens Next?
While Trump’s plan is bold and ambitious, implementing such dramatic shifts won't occur overnight. Major changes to the tax system would require Congressional approval, which may be challenging given the current political climate. Economic experts warn that depending solely on tariffs could lead to unpredictable consequences, such as trade wars or inflation spikes, which would ultimately affect everyday Americans.
The discourse surrounding this proposal is just heating up, and one thing is clear: if Trump's plan to replace the IRS moves forward, it could result in one of the most significant tax policy changes in U.S. history. Whether this will galvanize a resurgence in American manufacturing or lead to unforeseen economic challenges remains an open question.
Stay tuned as we explore further developments in this bold proposal from the former president.