Trump has said that tariff revenue could be used to replace income tax

President Trump recently suggested that tariff revenues could benefit Americans earning under $200,000—well above the 2023 median personal income—and he hailed the windfall as a potential “External Revenue Service.” However, economists remain skeptical that tariffs can replace income taxes even for middle-income earners. A Council on Foreign Relations analysis estimates that tariffs would fall well short of offsetting income taxes paid by the bottom 90% of earners.

Tariff collections have surged: April revenues came in at roughly $17.4 billion, followed by $22.2 billion in May—a new monthly high. By late August, total 2025 tariff receipts had surpassed $183 billion, with about $130 billion collected since early April. These inflows highlight the scale of tariff-driven revenue growth, even as the overall impact on consumers and businesses remains contested.

A significant legal challenge now looms, however. A federal appeals court recently ruled that Trump exceeded his authority by imposing broad tariffs under emergency powers. Although the tariffs remain in place pending appeal, nearly half of the projected 2026 tariff revenue—much of it tied to these contested measures—could be at risk if the ruling is upheld.

While tariffs have generated sizable short-term income, legal uncertainty and ongoing court battles cast doubt on their long-term sustainability as a revenue source or substitute for income tax. If the courts ultimately strike them down, the fiscal outlook could shift sharply, with potential refund claims placing additional strain on federal finances.