President Donald Trump wants to abolish the Internal Revenue Service and create an “external” revenue service that will somehow force the rest of the world to fund the U.S. government, according to his newly confirmed commerce secretary.
“His goal is to abolish the Internal Revenue Service and let all the outsiders pay,” Howard Lutnick told Fox News host Jesse Watters on Wednesday night.
Instead of the IRS, Trump plans to create an “external revenue service” that will “get rid of all these tax scams that hammer against America” and raise $1 trillion of revenue, he said, promising that Elon Musk’s cost-cutting task force DOGE would also find $1 trillion in waste and fraud to eliminate.
In January, Trump vowed to create an “External Revenue Service” to oversee tariffs, though he stopped short of saying he would eliminate the IRS. The rebranding reflects Trump’s oft-repeated and inaccurate claim that tariffs are paid by foreign countries.
In fact, they’re a tax paid by American companies, with the costs passed on to consumers. They’re also collected by Customs and Border Protection, not the IRS, according to Axios. Trump has nevertheless said that “tariff” is “the most beautiful word in the dictionary.”
In February, he announced a 25 percent tariff on all products from Mexico and Canada, and 10 percent on all products from China, before agreeing to temporarily pause the tariffs against Mexico and Canada. If the proposed tariffs are implemented, they’re projected to cost about $272 billion per year, triggering massive inflation, economists told CNN and Axios.
Trump’s “external” service would also handle duties—a tax based on the type of product, as opposed to the country of origin, that is also paid by American companies—and “all revenue that comes from foreign sources,” Trump wrote in a Truth Social post last month.
It’s not entirely clear what that foreign revenue would consist of, though Trump has made vague threats to make foreign companies pay to enter the U.S. market.
“The foreign producer has contributed nothing to the growth or development of this country, so if you want to share with the citizens of the United States our home market, then you must pay for the privilege of doing it,” he said during a January speech at the Congressional Institute. “In other words, you have to pay for the privilege of coming to our country, of taking our jobs, taking our product, destroying our countries. [SIC]”
During the same speech, he also floated the idea of abolishing income tax, which would seem to be consistent with dismantling the IRS. The agency also collects employment tax, Social Security tax, inheritance and estates taxes, and other revenues.
Already the IRS is poised to lay off thousands of workers, according to Axios.
On Wednesday, Lutnick vowed to tax foreign cruise ships, supertankers and alcohol producers, none of which pay taxes in the U.S., he said.
“This is going to end under Donald Trump, and those taxes are going to be paid. Net American tax rates are going to come down,” he said.
