Trump will not abolish the IRS in any near-term sense. The agency still exists, still collects income taxes, and is written into the tax law Trump himself signed in July 2025. What has happened is different and more consequential in the short run: the IRS has been cut by roughly 30% of its workforce, stripped of most of the enforcement money Congress gave it in 2022, and reshaped through program eliminations and policy changes. The parallel plan to replace the income tax with tariff revenue has run into two hard walls, one arithmetic and one legal, and Congress has passed no legislation to eliminate the income tax or shut down the Internal Revenue Service.
What Trump Has Actually Proposed
Five days before his January 20, 2025 inauguration, Trump announced on Truth Social the creation of an “External Revenue Service” to collect tariffs and other trade revenues. He mentioned it in his inaugural address and signed a first-day executive order directing the Treasury, Commerce, and Homeland Security secretaries to study the idea.1CNN. Trump Abolish IRS Commerce Secretary Howard Lutnick described the goal as “to abolish the Internal Revenue Service and let all the outsiders pay.”
Trump has returned to the theme repeatedly. In a Thanksgiving 2025 video with service members he said, “Over the next couple of years, I think we’ll be cutting income tax — could be almost completely cutting it, because the money we’re taking in is going to be so large.”2PBS NewsHour. Trump Has Said Tariff Revenue May Allow Americans to Stop Paying Income Taxes In his February 2026 State of the Union he told Congress “a robust tariff policy” could “substantially replace the modern-day system of income tax.” A White House spokesperson later clarified that Trump was not claiming current tariffs could cover income taxes, but that a more aggressive tariff regime eventually could.3CNBC. Trump Tariffs Income Taxes
The External Revenue Service itself has not been formally established. The president cannot create a federal agency by executive order alone, and U.S. Customs and Border Protection continues to handle all customs duties. The ERS has no staff and no budget, and no public report has been released from the feasibility study Trump ordered.4Tax Notes. Trump and the External Revenue Service: What Just Happened
Why Tariffs Cannot Replace Income Taxes
The two revenue streams are on entirely different scales. In fiscal 2025 the federal government collected about $2.66 trillion in individual income taxes, roughly 51% of total federal revenue. Customs duties brought in about $195 billion, or 3.7%.3CNBC. Trump Tariffs Income Taxes5USAFacts. How Much Revenue Does the Federal Government Collect From Tariffs Adding corporate income taxes, the total tariffs would need to replace is roughly $3.2 trillion a year.6American Enterprise Institute. Tariffs Cannot Fully Replace the Income Tax
Tariffs are also self-limiting. The higher the rate, the fewer goods people import, and the less revenue is collected. Kyle Pomerleau of the American Enterprise Institute calculated that replacing all income tax revenue with no behavioral changes would require an effective tariff rate of about 220%, but at that rate taxable imports would shrink by roughly 95%. The revenue-maximizing rate, he found, is about 66%, which would cover only about a third of income tax collections.6American Enterprise Institute. Tariffs Cannot Fully Replace the Income Tax Peterson Institute researchers reached a similar ceiling, estimating peak tariff revenue around $780 billion, well under half of income tax collections.7Peterson Institute for International Economics. Can Trump Replace Income Taxes With Tariffs
The Tax Foundation projected Trump’s tariffs, if kept in place, would generate about $191 billion in 2026. The Tax Policy Center estimated they would replace only about 8% of the roughly $34 trillion in federal income tax revenue projected over the next decade.2PBS NewsHour. Trump Has Said Tariff Revenue May Allow Americans to Stop Paying Income Taxes8Tax Policy Center. TPC Trump Tariffs Would Raise Household Taxes and Slow Imports Tariffs also function as a consumption tax, falling more heavily on lower- and middle-income households, which spend a larger share of income on goods.
The Supreme Court Ruling That Broke the Plan
On February 20, 2026, the Supreme Court ruled 6-3 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the president to impose tariffs. The Court held that the Constitution grants the power to “lay and collect Taxes, Duties, Imposts and Excises” exclusively to Congress, and that IEEPA’s language about regulating imports does not include a taxing power. Applying the major questions doctrine, the majority noted that no president in IEEPA’s half-century of existence had ever used it to impose tariffs.9Supreme Court of the United States. Learning Resources, Inc. v. Trump, No. 24-1287
The decision invalidated the 25% duty on most Canadian and Mexican imports, tariffs on Chinese goods, and the baseline “reciprocal” tariff on other trading partners.10Brookings Institution. Brookings Experts on the Supreme Court’s Tariff Decision The Penn Wharton Budget Model estimated the ruling could produce up to $175 billion in refund claims from importers, and projected future tariff revenue would fall by roughly half absent congressional action.11Penn Wharton Budget Model. Supreme Court Tariff Ruling
Trump replaced the IEEPA tariffs with a new 10% tariff under Section 122 of the Trade Act of 1974, a narrower authority that caps tariffs at 150 days without congressional extension. The Tax Policy Center estimated the replacement tariff would generate about $22.3 billion in 2026, a small fraction of what IEEPA tariffs had been collecting.12Tax Policy Center. Tracking Trump Tariffs The fastest tool for unilateral tariff action is gone, and any income-tax-replacement scheme now depends on legislation that does not exist.
What Congress Has Done, and Not Done
Legislation to eliminate the income tax and abolish the IRS has been introduced in every Congress since 1999. The current version, the FairTax Act (H.R. 25), was introduced on January 9, 2025 by Representative Earl “Buddy” Carter of Georgia with a dozen Republican co-sponsors. It would repeal the entire federal tax code, replace it with a national retail sales tax, and abolish the IRS.13Office of Rep. Buddy Carter. H.R. 25, The Fair Tax Act A Brookings Institution analysis called the proposal “essentially unworkable,” estimating the true required sales tax rate at 28% to over 46%. The bill has not advanced out of committee, and its co-sponsor count has fallen from as many as 83 members in earlier sessions to roughly 24.14Brookings Institution. Deconstructing the Fair Tax
What Congress has passed points the other way. The One Big Beautiful Bill Act, which Trump signed on July 4, 2025, permanently extended the 2017 tax cuts, created new tax-advantaged “Trump Accounts” for children, exempted tips and overtime pay from federal income taxes through 2028, expanded HSA eligibility, restored 100% first-year business depreciation, and imposed a new 1% excise tax on certain remittance transfers.15Internal Revenue Service. One Big Beautiful Bill Provisions16Bipartisan Policy Center. What’s in the 2025 House Republican Tax Bill Every one of those provisions assumes an IRS to administer them.
How the IRS Has Actually Been Changed
The agency has not been abolished, but it has been reshaped through the deepest cuts in its modern history.
Workforce
The IRS workforce fell from about 102,000 employees in January 2025 to fewer than 76,000 by mid-2025, a reduction of roughly 26%.17Federal News Network. IRS Watchdog Warns of Tax Filing Challenges After Agency Cuts 25% of Workforce By January 2026 the total headcount had dropped by about 30%, a net 28% after roughly 2,000 backfilled hires.18Treasury Inspector General for Tax Administration. IRS Workforce Reduction Report The administration has said it wants to bring the agency to about 50,000 employees, staffing levels not seen since the 1960s.19Yale Budget Lab. Weakened IRS Has Substantial Consequences
Reductions came through deferred-resignation offers, terminations of about 7,300 probationary employees in early 2025 (some later reinstated by court order), and post-filing-season voluntary separations affecting more than 26,000 employees.20GovExec. Staff Cuts, New Rules, and Reassignments as IRS Nears Finish Line on Tax Season Marked by Upheaval IT staffing fell 27%, taxpayer services fell about 22%, and the agency lost over 3,600 revenue agents, roughly 31% of the specialists who handle complex and high-income audits.19Yale Budget Lab. Weakened IRS Has Substantial Consequences
Budget
The 2022 Inflation Reduction Act gave the IRS $79.4 billion in supplemental funding over ten years, with $45.6 billion earmarked for enforcement. That money has been rescinded in stages: $1.4 billion in the Fiscal Responsibility Act of 2023, $20.2 billion in a March 2024 omnibus, and another $11.7 billion in the bipartisan budget deal signed in early 2026.21Institute on Taxation and Economic Policy. IRS Funding Cuts and Tax Avoidance22Tax Law Center. The Bipartisan Budget Deal Rewards Tax Cheats and Sets Up the IRS to Fail By mid-2026 roughly 92% of the original enforcement allocation had been clawed back, leaving about $300 million; only $3.5 billion had actually been spent for its intended purpose.
The IRS base budget was cut 9% for fiscal 2026, to $11.2 billion, with enforcement funding at its lowest inflation-adjusted level since 1988.23CNBC. IRS Budget Cut 2026 The fiscal 2027 request proposes a further $1.4 billion reduction, including an 18% cut to enforcement.24Center on Budget and Policy Priorities. Three Strikes Against Filers This Tax Season
Direct File
The free IRS Direct File program, which had expanded to 25 states for the 2025 filing season, was shut down. Treasury announced the suspension on October 2, 2025, citing “low participation and relatively high costs” of about $41 million for tax year 2024, or roughly $138 per return. Nearly 297,000 people had used it. Treasury Secretary Scott Bessent said “the private sector can do a better job.” The One Big Beautiful Bill Act included a task force to study a public-private partnership replacement.25Tax Notes. IRS Shutters Direct File, Citing Cost and Low Uptake26Federal News Network. IRS Would Eliminate Direct File Under Trump-Backed Budget Reconciliation Bill
Data Sharing With ICE
In April 2025 the IRS and Department of Homeland Security signed a memorandum of understanding to share taxpayer data with Immigration and Customs Enforcement. By August 2025 the IRS had disclosed tens of thousands of taxpayer records, including names and home addresses, after ICE requested data on nearly 1.3 million taxpayers. Acting IRS head Melanie Krause resigned over the agreement, and IRS lawyers had internally advised it likely violated federal privacy law.27Economic Policy Institute. ICE and IRS Reach Agreement to Share Taxpayer Information A federal judge blocked further sharing in November 2025, ruling the arrangement likely violated Section 6103 of the Internal Revenue Code; a Massachusetts federal court issued a similar order in February 2026.28FedScoop. Judge Blocks IRS-ICE Data Sharing Agreement The Yale Budget Lab estimated the policy could reduce federal revenue by $147 billion to $479 billion over ten years by discouraging tax compliance among immigrant filers.19Yale Budget Lab. Weakened IRS Has Substantial Consequences
What It Means for the Deficit and for Taxpayers
Cutting the IRS does not save money in the ordinary sense, because the agency collects far more than it costs to operate. The Congressional Budget Office has estimated that $80 billion in IRS funding would produce $204 billion in additional revenue, a net gain of $124 billion. Running that logic in reverse, the CBO projected that the $11.7 billion rescission in the 2026 budget deal alone would raise deficits by $27 billion over a decade.22Tax Law Center. The Bipartisan Budget Deal Rewards Tax Cheats and Sets Up the IRS to Fail
The Yale Budget Lab estimates the combined effect of the workforce reductions and funding clawbacks will decrease federal revenue by $861 billion over 2026-2035, with roughly $598 billion attributed to staffing losses and $263 billion to the IRA rescissions.19Yale Budget Lab. Weakened IRS Has Substantial Consequences The annual tax gap already approaches $700 billion and is expected to widen. Between 2010 and 2019, audit rates for taxpayers earning over $5 million fell from about 16% to just over 2%, and the current cuts will push those rates lower.
For filers in the near term, the visible consequences are longer waits and reduced help. For the 2026 filing season the IRS lowered its target for answering phone calls from 85% to 70%, met only 20% of its hiring goal for temporary customer service workers, and reassigned HR and IT employees to answer phones and process returns. Unprocessed returns and correspondence backlogs stood at more than double pre-pandemic levels, and the agency has projected phone answer rates could fall to 16% without more funding.24Center on Budget and Policy Priorities. Three Strikes Against Filers This Tax Season29Federal News Network. IRS Watchdog Warns of Tax Filing Challenges
The federal government spends roughly $6.5 trillion a year. Income taxes fund more than half of that. Tariffs, even at their recent peak, have never covered more than about 4% of federal spending. Abolishing the IRS would require either replacing more than $3 trillion a year through a mechanism Congress has shown no appetite to create, or cutting federal spending to a fraction of its current level. What Trump is doing to the IRS is real, and it is reshaping how the agency works, how much it collects, and who it audits. What he has said about ending the income tax remains rhetoric, and the law on the books keeps pointing the other way.