During a town hall event at a barbershop in the Bronx—yes, really—this week, former President Donald Trump was asked about the possibility of eliminating the federal income tax.
How he answered revealed something about how Trump understands fiscal policy—and something important about what he doesn’t, despite having spent nine years either campaigning for the president or sitting in the White House.
The question is a bit of a random one for a presidential candidate to field, but it’s a sensible thing to ask since Trump has spent months promising to exempt various types of income—including tips and Social Security payments—from federal income tax. So why not just eliminate the federal income tax altogether?
Trump seemed to take the idea at least semi-seriously. “In the old days…in the 1890s,” Trump said, “[the United States] had all tariffs—it didn’t have an income tax.”
“We have people that are dying, they’re paying tax and they don’t have the money to pay the tax,” Trump continued.
On this point, Trump is directionally correct. The income tax sucks! It is a real burden that creates a disincentive to work and unfairly robs productive Americans of their earnings. And Trump is right that there was a time when the country didn’t have an income tax. A temporary one was imposed during the Civil War, but the income tax as we know it today was created after the passage of the 16th Amendment in 1913.
This isn’t the first time Trump has mentioned the 1890s as a model for American fiscal policy, as The New York Times noted on Thursday, and some of the nationalist conservatives who support his campaign also seem to have a fondness for the era when tariffs were the primary means of funding the (much smaller) federal government.
But there are two sides to fiscal policy: revenue and spending. Of the two, the spending side—which indicates the “true tax,” as Milton Friedman famously put it—is the more important.
Put another way: If you want to fund the government at 1890s levels, and using 1890s methods, you have to have a plan to cut spending to 1890s levels too.
That’s impossible right now. Measured as a share of the size of the country’s economy, federal spending in the 1890s averaged around 3 percent of gross domestic product (GDP). In 2024, government spending exceeded 24 percent of GDP—more than $6.8 trillion.
Currently, America’s GDP is about $29 trillion. Cutting back to 1890s spending levels would mean the government could spend no more than about $900 billion next year. For context: the interest on the national debt cost $892 billion in fiscal year 2024.
That leaves less than $10 billion for everything else. Goodbye, Social Security (which cost $1.4 trillion this year). Goodbye to the military. Goodbye to it all.
To be sure, Trump probably wasn’t being serious about returning the government to 1890s levels. Indeed, he’s never been serious about cutting spending at all. He added $8 trillion to the debt during his four years in office, and you can only blame the COVID-19 pandemic for the last few billion of that total.
Trump needs a plan to cut spending. A real one. Yes, his unofficial campaign surrogate Elon Musk has recently taken up this cause, promising that a second Trump administration would “spend a lot less” by rolling back regulations and firing federal workers. That sounds more like a Trumpified version of the ever-present campaign trail promises to root out “waste, fraud, and abuse” than it does like an actual plan—but, sure, go for it.
It’s not the 1890s that should be the goal for Trump and his fellow Republicans, but rather the 1990s (at least as a starting point). Toward the end of that decade, the most recent time that the federal budget was balanced, government spending was less than 18 percent of GDP. Simply getting close to that level today would require a massive rollback of what the government does.
Unfortunately, that’s not what Trump is promising to do. In fact, independent analyses of his (not-all-that-well-defined) agenda show he would widen the budget deficit.
There is a huge disconnect between the amount of government that Americans get and what they pay for right now. Closing that gap should be a priority for the next administration—and Congress. Any talk about cutting taxes should not be taken seriously until there’s an actual plan in place to control spending.
The post Where Is Trump’s Plan To Cut Spending? appeared first on Reason.com.
