Trump's Plan to Abolish the IRS: Insights from Commerce Secretary Howard Lutnick.
Howard Lutnick, the newly confirmed Commerce Secretary under President Donald Trump’s administration, has reiterated the President’s bold proposal to abolish the Internal Revenue Service (IRS). Speaking on Jesse Watters Primetime on Fox News, Lutnick shared his thoughts on Trump's tax reform goals and the proposal for eliminating the IRS, which has sparked both support and criticism from various economic and political analysts.
What Lutnick Said
Lutnick was asked about the concept of the "External Revenue Service" (ERS), a proposal tied to Trump’s broader tax agenda. In response, he explained that the President’s vision was clear: "His goal is to abolish the Internal Revenue Service and let all the outsiders pay." Trump’s suggestion to eliminate federal income taxes altogether gained significant attention in January when he proposed a tax overhaul that focuses on using tariffs rather than income taxes. During a conference in Doral, Florida, Trump explained, “Instead of taxing our citizens to enrich foreign nations, we should be tariffing and taxing foreign nations to enrich our citizens.”
This statement aligns with a long-standing notion in Trump’s economic policy: shifting the burden of taxation away from U.S. citizens and toward foreign nations through trade measures like tariffs.
Elon Musk's Involvement
Lutnick also shared details about Elon Musk’s role in this ambitious proposal. Musk, who serves as a senior adviser to the White House in the Department of Government Efficiency (DOGE), is reportedly leading efforts to streamline government spending. Lutnick mentioned that Musk’s department plans to “cut” $1 trillion from government expenditures, with the ultimate goal of “getting rid of all these tax scams that hammer against America.” The Commerce Secretary went on to say that the initiatives would raise a trillion dollars in revenue, likely through a combination of government cuts and reforming the tax code.
The IRS Layoffs and Economic Impact
This proposal comes amid concerns about the IRS’s future amid reports of mass layoffs within the agency. The IRS, which plays a critical role in tax collection during the busy tax filing season, faces the possibility of significant downsizing, particularly among probationary employees who lack job protections. The Office of Personnel Management recently instructed all federal agencies, including the IRS, to lay off probationary workers, which could further complicate the IRS’s operations.
The Department of Government Efficiency (DOGE), which has been under fire for its mass firings across various federal agencies, has been criticized for not adequately addressing the potential impacts of these cuts on essential services. Lutnick did not address the IRS layoffs directly during the interview but noted that the broader changes to taxation and federal revenue collection were more pressing issues.
Economic Debate on Tariffs and External Revenue
While Trump’s idea for an “External Revenue Service” is bold, it has sparked debate among economists and analysts. Some, like Erica York, Vice President of Federal Tax Policy, argue that relying on tariffs as a source of revenue could harm the U.S. economy. In a previous appearance on Fox News, York explained, "Tariffs are not external revenue; they are taxes on U.S. importers that shrink both the U.S. economy and U.S. incomes. Higher tariffs will create a drag on the U.S. economy and will threaten to offset the benefits of tax cuts elsewhere." Critics argue that tariffs, while a tool for trade policy, may not be sustainable as a primary source of revenue without negative economic consequences.
However, a recent poll revealed that major U.S. companies, including Apple, Tesla, and Boeing, could bear the brunt of increased tariffs. The poll indicated that 35% of respondents believe Apple would be the most impacted by such tariffs, further complicating the debate surrounding Trump's proposed tax reforms.
What’s Next for Trump’s Tax Proposals
Trump's push to dismantle the IRS and shift taxation strategies through tariffs is not without its challenges. While it may appeal to some of his base and aligns with his broader “America First” economic agenda, it faces significant opposition from those who argue that such moves could destabilize the U.S. economy and hurt domestic businesses.
The coming months may bring more detailed proposals on how Trump’s administration plans to tackle the tax code, especially as concerns around IRS efficiency and federal revenue continue to grow. With key figures like Howard Lutnick and Elon Musk at the forefront of these discussions, the future of the U.S. tax system could see a significant overhaul—one that could have lasting consequences for U.S. businesses, taxpayers, and the global economy.
In conclusion, while the abolition of the IRS remains a bold and controversial idea, it aligns with broader efforts by the Trump administration to reshape the U.S. economy through tariff-based policies and government efficiency reforms. Whether this vision comes to fruition will depend on how policymakers and the public respond to these proposals in the coming years.
