The End of Form 1040? Analyzing Trump’s Tariff-Based "No Income Tax" Proposal
Ryan Millan, CPA
An Editorial Analysis of a Radical Shift Toward a Tariff-Based Revenue Model and What It Means for High-Net-Worth Strategy
The American tax landscape has seen its fair share of "once-in-a-generation" overhauls, but recent discussions surrounding a total elimination of the federal income tax represent something more: a paradigm shift.
President Donald Trump has floated the concept of returning the United States to a late 19th-century revenue model—one where the federal government is funded primarily through import tariffs rather than the direct taxation of personal income. While the proposal is currently in the "speculative" phase, the implications for business owners, investors, and the economy at large are too significant to ignore.
At Millan + Co. CPAs, our philosophy is rooted in proactive agility. Whether these proposals become law or remain political discourse, understanding the mechanics of such a shift is vital for long-term tax planning.
From Income Tax to Tariffs: The Historical Context
Before the ratification of the 16th Amendment in 1913, the federal government relied heavily on customs duties (tariffs) to fund its operations. Trump’s proposal suggests a "circle-back" to this era, potentially swapping the complex Internal Revenue Code for a robust tariff schedule on foreign-made goods.
The goal? To incentivize domestic manufacturing and decouple from foreign dependencies. However, the math is staggering. The federal government currently collects roughly $2.5 trillion in individual income taxes annually. To replace that entirely with tariffs would require a massive increase in the cost of imported goods, fundamentally altering the consumer landscape.
The Impact on High-Net-Worth Individuals and Business Owners
If the federal income tax were to vanish, the primary metric of "wealth building" would shift overnight. Currently, much of our business advisory work focuses on optimizing "above-the-line" deductions and managing brackets.
In a "No Income Tax" world:
Liquidity Reimagined: Without a federal bite out of annual earnings, the velocity of capital for reinvestment would accelerate.
Shift to Consumption Taxes: While income might be "free," the cost of equipment, materials, and luxury goods imported from overseas would likely skyrocket.
The State Tax Factor: Unless states followed suit, the "State and Local Tax" (SALT) burden would become the primary focus of residency planning.
Why "Tax Planning" Still Matters in a Zero-Tax Proposal
It is a common misconception that if income tax disappears, the CPA becomes obsolete. In reality, the complexity simply migrates.
Even in the absence of a federal income tax, business owners would still grapple with corporate taxes, payroll taxes, and a likely surge in Fractional CFO needs to navigate the inflationary pressures that high tariffs can bring to a supply chain. Strategic wealth preservation is never just about the tax you pay; it’s about the value you keep.
The Millan Perspective: Preparedness Over Prediction
We don’t have a crystal ball, but we do have a strategy. Whether we move toward a tariff-based system or a renewal of current codes, the objective remains the same: Staying liquid, staying compliant, and staying ahead of the curve.
Frequently Asked Questions
Is it actually possible to fund the government without income tax? Economists are divided. Organizations like the Tax Foundation suggest that replacing all income tax with tariffs would require exceptionally high rates that could impact global trade stability.
What happens to capital gains taxes under this proposal? Most iterations of this proposal involve the elimination of the entire direct tax apparatus, which would include capital gains. This would make the U.S. one of the most attractive investment havens in the world.
How would this impact specialized sectors, such as medical practices? Even without federal income tax, medical practice owners would face new challenges, primarily rising costs for imported equipment and pharmaceuticals. Strategies we currently prioritize for doctors-such as PTE Tax Elections, Entity Structuring, and Cost Segregation- would remain vital for managing state-level burdens and ensuring practice liquidity.
Should I change my investment strategy now? No. At this stage, the proposal is speculative. We recommend maintaining your current tax-efficient strategies while keeping an eye on the proposals.
How would this affect the IRS? The IRS would likely be drastically downsized or pivoted toward a "Customs and Border" focused revenue collection agency, as the burden of collection moves from the individual to the importer.
Stay Ahead of the Fiscal Curve
The potential shift toward a tariff-based economy is a reminder that the most valuable asset in tax planning isn't a specific deduction—it's agility. Whether the future holds a 0% income tax or a new set of complex brackets, our team is dedicated to navigating that complexity so you can focus on growth.
Ready to stress-test your current strategy against potential policy shifts?
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Additional Resources & Further Reading
One Big Beautiful Bill Act Overview Details on 2026 tax changes- permanent vs temporary provisions.
