What If the U.S. Didn’t Need Income Tax?

Written by Michael G. Brown

What if the U.S. Didn't Need Income Tax?

By Michael of Niche Pros | Inspired by Valuetainment’s deep dive into government inefficiency and tax reform and answer the following question, What If the U.S. Didn’t Need Income Tax?

So, What if the U.S. Didn't Need Income Tax?

Imagine a world where your paycheck arrives—no deductions, no withholdings, just your full income.

It may sound like wishful thinking, but history—and recent debates—tell us it’s not as far-fetched as it seems.

A recent video from Valuetainment asked a provocative question: Could the U.S. eliminate income tax altogether by rethinking how the government funds itself? Their analysis blends history, economics, and entrepreneurial thinking to make a case worth considering.

Let’s unpack it.

Income Tax: A “Temporary” Solution That Stuck

For most of America’s early history, the federal government operated without taxing individuals’ income. Revenue came from tariffs, land sales, and excise taxes. In fact, in 1895, the U.S. Supreme Court struck down a proposed income tax as unconstitutional.

But everything changed in 1913 with the ratification of the 16th Amendment. The government now had a green light to tax income directly. During World War I, income tax was introduced as a short-term measure to fund war efforts. At the time, it affected only the wealthiest citizens.

Fast forward a few decades, and that “temporary” tax is permanent, universal, and increasingly complex.

Bureaucracy vs. Efficiency

Today, the U.S. collects over $4.7 trillion in taxes each year. Nearly 100% of that comes from some form of income or payroll tax.

But what if we challenged the way the government operates?

Patric highlights the federal agency called the Department of Government Efficiency (DOGE)—a tongue-in-cheek nod to Elon Musk’s restructuring of Twitter, where he reportedly slashed two-thirds of the staff and kept the platform running. Could a similar approach apply to federal agencies?

This is more than a tech guy fantasy. It’s about rethinking how government can work smarter, not bigger.

Can Tariffs Replace Income Tax?

Here’s where the conversation gets exciting.

In 2023, the U.S. imported an astonishing $3.83 trillion in goods. Yet, the tariffs collected on those imports totaled just $80 billion—a surprisingly small return given the scale of trade.

Now picture this: if the U.S. strategically applied a 25% tariff on select imports—particularly from countries that thrive on American consumer demand—we could unlock nearly $1 trillion in new revenue. That’s not just a boost to the budget; it could significantly offset, or even begin to replace, a portion of the personal income tax burden.

Yes, it’s important to acknowledge potential risks like trade tensions, inflation, and political pushback. But there's also a real opportunity here—to rethink a tax system that currently penalizes productivity and innovation.

Where Does Our Tax Money Go?

Let’s look at federal spending:

Split of where Tax money goes

Four Steps Toward Bold Reform

If we wanted to explore an alternative to income tax, here’s what Patrick Bet-David saids it'll take:

1. Apply business efficiency models to government. Trim waste. Flatten bureaucracy.

2. Rebalance the revenue mix. Strategically raise tariffs without triggering trade retaliation.

3. Audit spending rigorously. Just like a CEO would—department by department.

4. Restructure entitlements. Use technology and partnerships to maintain benefits at a lower cost.

None of this is easy. But innovation rarely is.

Time to Rethink the System?

It’s easy to assume the current tax model is set in stone. But it’s only been around for a little over 100 years. In government terms, that’s barely middle-aged.

The idea of replacing income tax with something smarter—more transparent, and less punitive—isn’t new. What’s new is that we now have the tools, data, and public appetite to ask better questions.

Maybe the next generation of reform doesn’t start in Washington. Maybe it starts with entrepreneurs, economists, and everyday citizens saying, “There has to be a better way.”

Here's a question for you readers, what would it mean for Brazil if income taxes were completely removed from the Federal Code? Would it be a bold step toward growth—or chaos in disguise? I'm curious to hear your thoughts!