WASHINGTON (TNND) — President Donald Trump has proposed abolishing federal income taxes, suggesting that tariffs and taxes on foreign nations could replace the revenue. The federal government is projected to collect $518 billion in individual income taxes for fiscal year 2025, accounting for 48% of its total revenue. This revenue funds various programs, services, and interest on government debt.

To implement this change, Trump would need to collaborate with Congress. According to GoBankingRates, while American workers might initially see larger paychecks, the shift could lead to higher inflation, offsetting wage increases.

“This increase in disposable income would have the effect of stimulating the economy, but at the expense of likely increasing real inflation,” Crystal Stranger, CEO at Optic Tax told the website. “Thus, it is likely that, while people would benefit for a short time, soon their wages would be worth less. So, they would not get a long-term benefit in general.”

Federal income taxesbegan in 1913with the ratification of the 16th Amendment, which allowed Congress to levy taxes on incomes. Initially, the U.S. relied on tariffs for revenue, but the growing nation required more funding for infrastructure, military, and social services. Early tax rates were low, but they increased significantly during World War I and have fluctuated since. The Great Depression and World War II expanded income taxes to the middle class, making them a permanent fixture.

Several countries, including Bahrain, the Bahamas, and Oman, do not have a federal income tax. Bahrain and Oman rely on oil and gas revenues, while the Bahamas generate revenue from customs duties, property taxes, and stamp duties, according to Investopedia.

According to the Tax Foundation, in 2022, taxpayers filed 153.8 million tax returns, reporting nearly $14.8 trillion in adjusted gross income and paying $2.1 trillion in individual income taxes. Eliminating these taxes could save the median household between $7,000 to $10,000 annually, depending on filing status. The top 1% of earners, taxed at around 37%, would save significantly more.