Trump’s Ambitious Plan to Abolish the IRS: A Radical Shift in U.S. Taxation Policy

Trump’s Ambitious Plan to Abolish the IRS: A Radical Shift in U.S. Taxation Policy

Edited by: Fern Sidman

In a bold and unprecedented move, Commerce Secretary Howard Lutnick announced on Wednesday evening that President Donald Trump’s goal is to “abolish” the Internal Revenue Service (IRS)—a statement that sent shockwaves through political and economic circles. Axios reported that this radical shift in taxation policy builds upon Trump’s broader vision of restructuring the federal revenue system. If implemented, the abolition of the IRS would fundamentally transform the way the U.S. government collects revenue, replacing federal income taxes with a tariff-based system designed to generate funds from foreign nations rather than American citizens

Axios reported that Trump’s proposed solution to eliminating the IRS is the creation of an “External Revenue Service”, which would oversee tariffs and other potential revenue streams derived from foreign nations. This approach aligns with Trump’s long-standing economic philosophy of shifting financial burdens away from American taxpayers and onto external sources. By leveraging tariffs and trade duties, Trump’s strategy seeks to “tariff and tax foreign nations to enrich our citizens,” as he has repeatedly stated in campaign speeches and interviews.

Trump’s economic team appears to be coalescing around this dramatic restructuring, with Lutnick outlining the administration’s rationale on Fox News’ Jesse Watters Primetime. The Axios report highlighted that Trump’s push to overhaul the federal tax system is not just about cutting taxes but about fundamentally changing the way government raises revenue.

According to the information provided in the Axios report, Elon Musk—serving as a senior White House adviser leading the Department of Government Efficiency (DOGE)—has been tasked with spearheading a massive cost-cutting initiative. Lutnick stated on Fox News that Musk intends to “cut $1 trillion” from government spending, followed by eliminating tax loopholes and scams that disadvantage American taxpayers.

This strategic move, Axios noted, is a key pillar in Trump’s overarching economic plan. With Musk at the helm of DOGE, the administration is signaling a commitment to dramatic reductions in federal expenditures while simultaneously identifying new revenue sources outside traditional income taxation.

The report at Axios emphasized that Trump’s plan to eliminate the IRS represents a fundamental departure from how the U.S. tax system has operated for over a century. Lutnick explained on Fox News that under this new system, the burden of taxation would largely fall on foreign entities rather than domestic earners. The vision, as laid out by Lutnick and Trump, suggests that tariffs and other foreign revenue-generating mechanisms would replace personal income taxes, effectively shifting financial responsibility from American workers to international trade partners.

 Jesse Watters, the Fox News host, questioned Lutnick about what would happen to the money saved from these government cuts. Axios reported that Lutnick responded by framing Trump’s approach as a populist, America-first strategy, saying: “Think about it, Donald Trump announces the External Revenue Service, and his goal is very simple … his goal is to abolish the Internal Revenue Service and let all the outsiders pay.”

This statement calls attention to Trump’s effort to redirect tax obligations from American citizens to external sources, reinforcing his nationalist economic stance.

While Lutnick did not explicitly discuss mass layoffs at the IRS during his Fox News interview, Axios reported that the agency is poised to lay off thousands of employees as part of a DOGE-led effort to downsize the federal workforce.

One of the most immediate impacts of this policy shift is already being felt by IRS workers. The Axios report noted that Shannon Ellis, president of the Kansas City chapter of the National Treasury Employee Union, confirmed that employees in the Small Business/Self-Employed Division who are still on probation were notified that their terminations could take effect as soon as Thursday.

These layoffs are indicative of a larger strategy by the Trump administration to significantly reduce the size of the federal government, particularly within agencies that Trump has criticized as inefficient or overly bureaucratic. The Axios report highlighted that these cuts could be just the beginning of a broader purge within federal agencies.

The report at Axios also outlined several critical implications and potential challenges associated with Trump’s plan to dismantle the IRS and replace it with an External Revenue Service:

Eliminating the IRS would require significant congressional approval and could face intense opposition from lawmakers, particularly those concerned about government revenue stability.

While Trump’s plan relies on tariffs and foreign taxation, the Axios report questioned whether such measures could reliably generate the same level of funding currently collected from income taxes.

Economists have long debated the effectiveness and sustainability of tariffs as a primary revenue source.

The Axios report suggested that abolishing income taxes would be immensely popular with voters, especially those who feel overburdened by tax obligations.

However, businesses and trade groups may push back against increased tariffs, which could lead to potential trade disputes or higher costs for American consumers.

Shifting the tax burden from individuals to international trade partners could have unintended economic consequences, including possible retaliatory tariffs from foreign nations.

The report at Axios pointed out that the global economic landscape could shift dramatically if the U.S. were to abandon income taxation in favor of tariff-based revenue collection.

As Axios reported, Trump’s plan to abolish the IRS and create an External Revenue Service is one of the most ambitious economic proposals of his presidency. With Elon Musk leading a cost-cutting initiative through DOGE and the administration aiming to collect revenue from external sources, the U.S. could see a monumental shift in how government funding is structured.

However, the feasibility of this plan remains uncertain, as Axios highlighted the numerous legal, economic, and political challenges that such a sweeping reform would entail. While Trump’s supporters view this as a populist-driven economic revolution, critics warn that eliminating federal income taxes and relying solely on tariffs could destabilize the U.S. economy and government operations.

Regardless of the outcome, the Axios report asserted that Trump’s commitment to dismantling traditional tax structures and overhauling federal revenue collection signals a defining moment in American fiscal policy—one that could reshape the country’s economic foundation for generations to come.