ClearValue Tax (Uncut) [Will Tariffs Replace Income Taxes in the USA?] 01-27-2025

Trump’s ERS: Will Tariffs Replace Income Taxes in the USA?

In today’s video, I’m going to give you a full update on the ERS, President Trump’s External Revenue Service. So let’s answer these questions. What is the status of the ERS? Will the ERS replace the income tax? And is the ERS a good idea? So this last part, of course, is going to be a matter of opinion.

So let’s start with this, a status update of the ERS. What’s going on right So upon inauguration, President Trump signed the presidential memo, the American First Trade Policy. This directs the government to determine the feasibility of creating the External Revenue Service.

So within the American First Trade Policy, it says this, the Secretary of the Treasury, Commerce, and Homeland Security shall investigate the feasibility of establishing and recommend the best methods for designing, building, and implementing an External Revenue Service, ERS, to collect tariffs, duties, and other foreign trade-related revenues. Okay, so how would the ERS be created? So the creation of a new federal agency, such as the ERS, typically requires congressional approval. This means that legislation would have to be drafted, introduced, and passed by both the House and the Senate.

Then Congress would have to find a way for the new agency to get funding, so appropriation of funds. So this is the traditional approach. This is how you’re supposed to do it when a new government agency is formed, and this is the way that Trump has decided to take it.

Maybe this wasn’t his initial plan, but this is what’s happening right now. Because if he created the ERS with an executive order, then you know it would have been challenged legally, and then it would have gotten shot down, you know, most likely. But anyways, this is why Trump decided not to use an EO to form the ERS immediately.

Now with that being said, with that in mind, let’s go back to the status update of the ERS. Where do we currently stand? So President Trump said that he would create the ERS on his first day of office. The fact is, that did not happen.

Right now, they’re doing the feasibility study. Okay, but while that’s happening, you have other politicians pushing ahead with other pieces of this. I mean, you know, for example, take a look at this.

Look at this go-getter showing initiative. So Senator Bernie Moreno introduced the bill to fund the ERS. Long story short, Senator Moreno wants to redirect money that Biden approved for the IRS to instead go to the ERS.

So that is the status of the ERS. It’s currently not in existence. The feasibility test is being performed, and they’re looking for of funding.

But I want you to be clearly aware that there’s no guarantee that Trump will decide to go through with the creation of the ERS. President Trump may decide that he doesn’t want to do it. Now, will the ERS replace the income tax? This is a very good question.

I know that many people are very sensitive about this. They’re very emotionally charged by this question. So I will say this as nicely and as gently as possible.

The answer is no, wrong. Tariffs will not replace income taxes. And President Trump, I want you to be aware that he never said that he’s going to replace income taxes with tariff revenue.

So I don’t know where people are hearing this lie from. Okay, so you see this little smidge right here? Tariffs only account for 1.8% of government revenue. I mean, it could pass for a rounding error.

That doesn’t even cover the money that we give to Ukraine. The bulk of government revenue comes from income taxes and Social Security and Medicare taxes. But remember that the government spends more than they make.

Tariffs represent 1.8% of government revenue. However, tariffs only represent 1% of government spending. So taxes from tariffs cannot replace income taxes.

And I want to clarify the math because people are going to be tricked by the numbers. So when they say that Trump imposed tariffs on $380 billion of imports, that doesn’t mean that the US government collected $380 billion of taxes. It just means that that is what they taxed.

So for example, if the government puts a 10% tariff on $380 billion of imports, the government doesn’t collect $380 billion. They collect 10% of that. They collect $380 billion.

And another thing, when they say that tariffs that Trump did in his previous term provided $80 billion of tax collections, that’s great, but that is the total. You have to divide that by the number of years. So if the Trump tariffs raised $80 billion over the course of a four-year term, that’s $20 billion a year.

So that is peanuts. Did you know that the government spends $20 billion a day? So this tariff income, it’s not a game changer in regards to government funding. So this year, the government will collect about $5 trillion in taxes.

The government will spend about $7 trillion. The United States of America will import $4 trillion of goods and services. Even if you made the import tax 100% on all imports, it still wouldn’t be enough to income taxes.

And it wouldn’t be even close to covering government spending. And I want you to be aware that Trump never promised that tariffs would replace income taxes. So on the Joe Rogan podcast, Rogan asked Trump if he’s serious about replacing income taxes with tariffs.

And you can see it for yourself. President Trump responded with, yeah, sure, why not? I mean, I wouldn’t take that too seriously. And another example, in passing, Trump said in front of reporters that back in the day, tariffs provided nearly all the funding for the federal government.

But that’s all that he said. He never said that he’s going to make that happen again. So I could say the same thing.

I could say that back in the day, a nickel would buy me a movie ticket and a shoeshine. That doesn’t mean that I’m promising that a nickel will once again buy me a movie ticket and a shoeshine. I’m just saying how it was back in the day.

That’s it. And listen, I want you to think about this. One of Trump’s biggest priorities, and you know this, is to cut taxes, not to replace them.

Why would he be talking about cutting income taxes if he’s trying to banish them? Okay, so now that we know that tariffs will not replace income taxes, let’s move on. Now, is the ERS a good idea? So we’re not debating whether tariffs are a good idea or a bad idea. We did that in our last video.

The question is, is the ERS a good idea? Okay, so this is just my opinion of the ERS. If you’re going to ask me, am I in favor of expanding the government, making the government more inefficient? I mean, the CBP already collects tariffs and duties, and wasting taxpayer resources, not just money, but time as well. Then I would say, no, I am not in favor of this.

I am against the ERS. Will it replace income taxes? The answer is no. Will it provide added value? The answer is no.

Will it waste time and money? Yes. Again, I want to point out that this is my opinion of the ERS, not tariffs. I would tell President Trump, like, hey, what are you doing? I thought you were against these things.

Why are you making the government bigger, more inefficient, and wasteful? Just, I would say, take my advice and just stop this nonsense. So listen, if President Trump decides to not create the ERS, I’m very curious to see how he’s going to break the news. I think the most graceful way for him to do it would be to just end it right here, right now, just early, before it just gets out of control.

I would just recommend that he say that the feasibility study showed that it just doesn’t make any sense. I would recommend that he would just upgrade or, you know, make modifications or improvements to the CBP. That would be my recommendation.

But anyways, that is just my opinion. Please let me know yours. I look forward to reading the comments.

And please subscribe. I’ll keep you updated. I thank you for the support, and wish you a very nice day.

Take care.