Building on the Joe Rogan experience, Donald Trump laid out a vision for 2024 that promises to shake the foundations of fiscal policy by eliminating the federal income tax. He floated the idea of replacing income taxes with customs duties and hinted at deploy Bitcoin to reduce the national debt.
These provocations caused shock waves in political and economic circles, triggering heated debates. Here’s what all this could mean for you and your Bitcoin bags.
Tariffs instead of income taxes
During the Civil War, the federal government imposed an income tax to pay for war expenses, but in Pollock v. Farmer’s Loan & Trust Co. (1895), the Supreme Court subsequently declared the federal income tax unconstitutional.
Then, income taxes were quietly replaced by customs duties or taxes on foreign products.
And of course, taxes came back in force! To finance the United States’ entry into World War I, Congress passed the Revenue Act of 1916, quickly followed by the War Revenue Act of 1917. Tax rates skyrocketed from a modest 15 percent in 1916 to a staggering 67 percent in 1917, and peaking at 67 percent in 1917. 77 percent in 1918. War is expensive.
Trump’s proposal to abolish the federal income tax and replace it with tariffs on imports draws on the policies of former President William McKinley. Trump argued to Joe Rogan that such measures in the past generated immense revenue for the United States, recalling a time when “we were so rich. We had so much money. We didn’t know what to do.
Critics warn, however, that tariffs are the Trojan horse of taxes, threatening to inflate prices and trigger heated trade skirmishes. The consequences could be widespread, impact international diplomacy and drive up the costs of everything from gadgets to raw materials.
Bitcoin: a tool to reduce the national debt?
In another radical proposal, Trump floated the idea of using Bitcoin to manage the national debt. In a conversation with Fox News’ Maria Bartiromo, he hinted at the possibility of paying off US creditors with Bitcoin, suggesting it could “wipe out our $35 trillion debt.”
Here is the FULL clip of Trump saying we will pay off the national debt with Bitcoin. This gives a little more context.
“It’s already bigger than any company in the world… you might as well be the leader.” pic.twitter.com/ZfYdb8rEMD
–Cory Bates (@corybates1895) August 3, 2024
Abandoning income tax in favor of a Bitcoin or tariff-based system is no walk in the park. Such a radical change requires a complete rewrite of the tax code, which risks hurting import-dependent industries and stoking the anger of global trade allies. The economic shockwaves could be immense, impacting inflation, employment and GDP.
Likewise, fighting Bitcoin to combat the national debt opens Pandora’s box of volatility issues. Its decentralized side offers a new frontier, but the mad rush of its value is a risk magnet. Additionally, integrating crypto into public finances means rewriting the rules and preparing for a clash with the financial establishment.
Why dropping the income tax would be a good thing under Trump
That said, abandoning the income tax would radically change human behavior, in a positive way.
The way taxes work at the basic level is that wealth and income are forcibly taken away from their producers and transferred to people who did not own that wealth or produce that income. Thus, future accumulation of wealth and production of income is discouraged, and confiscation and consumption of existing wealth and income is encouraged. As a result, society becomes poorer.
In an ideal system, Americans would only pay taxes on customs duties (on foreigners wishing to import goods), sales taxes (on items not directly related to food or energy), -values (on realized gains) and interest income (money loans). But is such a system too ideal? Is it “Atlas Shrugged” by Ayn Rand? Probably. That said, in less than a week we’ll see if Trump gets elected and even gets the chance to try out a system like the one he described to Joe Rogan.
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