With April 15 quickly approaching, now is the time to ponder President Trump’s pitch to replace the Internal Revenue Service with an External Revenue Service.

Trump has issued an executive order instructing the secretaries of the Treasury, Commerce, and Homeland Security to examine the possibility and suggest the most effective ways to formulate, construct, and implement an External Revenue Service (ERS) to gather tariffs, duties, and other revenues linked to foreign trade. In his inaugural speech, the President stated, “Instead of burdening our citizens to benefit other nations, we will levy tariffs and taxes on foreign nations to benefit our citizens.”

The President has claimed that billions of dollars have entered the U.S. thanks to tariffs charged to China, emphasizing a long way to go. Despite these statements, the reality is different. While the government has gained revenue from tariffs, it came from Americans, not China.

Trump’s idea is to remove individual and corporate income taxes and replace them with tariffs. However, the U.S. fails to collect sufficient revenue from tariffs to offset income taxes. The Congressional Research Service reveals that tariffs have never contributed more than 2% to federal revenue over the past 70 years. In 2024, tariffs only amounted to $77 billion, about 1.57% of total revenue and 1.14% of spending, nowhere near the $2.43 trillion from income taxes in that year.

Although about 70% of products enter the U.S. without tariffs, taxing all products, even at higher rates, would not generate $2.4 trillion. Trump’s tariffs would still target U.S. entities, not foreign countries as he suggests. According to the Tax Foundation, U.S. companies pay import taxes on goods from abroad directly to the U.S. government when tariffs are imposed.

Turning to the proposed External Revenue Service, the switch from the IRS to the ERS might not be advantageous for U.S. taxpayers, as both collect income from Americans. Implementing tariffs could lead to additional costs, inefficiencies, and possibly corruption.

Trump believes that tariffs would safeguard American jobs, yet it could undermine this goal. It poses a paradox where tariffs could either protect industries but lessen government revenue or collect more revenue at the expense of jobs. Even by replacing the federal income tax with tariffs, other taxes like estate and gift tax, excise taxes, and Social Security and Medicare payroll taxes would still need IRS oversight.

The proposed External Revenue Service would not be “external” in reality, as U.S. entities and individuals would be the taxpayers. The success of tariffs in aiding U.S. firms would lower revenue available for government spending.