President Donald Trump is working to eliminate the federal income tax and replace the IRS with a system that collects revenue through tariffs rather than taxing American workers, according to U.S. Commerce Secretary Howard Lutnick.

In a recent Fox News interview, Lutnick discussed Trump’s plan to shift the government’s funding model away from individual taxpayers and toward foreign nations and corporations. The proposal would create an External Revenue Service (ERS) that would generate funds through tariffs, allowing Americans to stop paying income taxes altogether.

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“Tariffs are going to drive America better,” Lutnick stated, explaining that Trump aims to replace traditional tax collection with a new system that puts the financial burden on other countries instead of U.S. citizens. He emphasized Trump’s goal of reducing tax burdens, including eliminating taxes on overtime pay, tips and seniors’ income.

Trump has long advocated for major tax reform, having previously cut personal and corporate tax rates during his first term. His latest proposal would mark a fundamental change in how the federal government collects money, shifting away from domestic taxation in favor of revenue generated through trade policies.

The ERS concept aligns with Trump’s broader push to renegotiate trade deals and impose higher tariffs on foreign goods, arguing that the U.S. should no longer rely on taxing its own citizens to fund government spending.

While specifics on implementation remain unclear, Trump’s team has increasingly highlighted tariffs as a key component of his second-term economic agenda.