Overview

• Commerce Secretary Howard Lutnick announced that President Trump intends to abolish the IRS and replace it with an 'External Revenue Service' focused on collecting tariffs and duties.
• The proposal suggests funding the federal government through tariffs on imported goods, but experts caution this would require extremely high tariffs, potentially exceeding 100% on all imports.
• Economists argue that such high tariffs could drive up consumer prices, reduce demand for imports, and ultimately fail to generate sufficient revenue to replace income taxes.
• The plan has sparked concerns about economic repercussions, including potential trade retaliation from key partners like Canada, Mexico, and China, which have already issued warnings.
• The IRS is reportedly preparing to lay off thousands of workers, raising questions about the future of tax collection as the new proposal faces significant hurdles, including congressional approval.