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Fox Panel: Tariffs Can't Replace Income Tax — Experts Point to Roughly $2 Trillion Shortfall

03:45 AM, 12/04/2025

Overview: Fox News host Martha MacCallum asked guests to respond to President Trump’s claim that tariffs could replace income tax. Economists Steve Forbes and Marcus Lemonis both rejected the idea, citing a roughly $2 trillion shortfall between income-tax receipts (~$2.5 trillion) and current tariff revenue (~$300–400 billion). Forbes warned that nearly 40% of households pay no federal income tax and would be harmed by high tariffs, while Lemonis said a proposed "tariff dividend" is unrealistic and urged policies that directly lower consumer costs.

Fox News anchor Martha MacCallum asked panelists to respond after President Donald Trump suggested that tariff revenue could make income taxes unnecessary. The panel pushed back, saying tariffs fall far short of replacing current federal income-tax receipts and warned of unintended consequences for consumers and lower-income households.

Steve Forbes, publisher and economist, broke down the math: “Federal income tax receipts are about $2.5 trillion. Tariff receipts are about $300–400 billion.” He noted that creates roughly a $2 trillion gap and highlighted that about 40% of households do not pay federal income tax — a group that would be particularly vulnerable if tariffs rose sharply.

Forbes: “So you got a two-trillion-dollar gap. Moreover, forty percent of households don't pay federal income tax. So if they get hit with a fifty, sixty, seventy percent tariff, what are you gonna do for them?”

Marcus Lemonis, CNBC commentator and businessman, called a tariff-backed plan unrealistic. He argued there is no revenue source ready to replace the current income tax base and said proposals such as a $2,000 "tariff dividend" are unlikely to materialize. Instead, Lemonis urged focusing on direct measures that lower everyday costs for consumers, like reducing housing and food expenses.

Lemonis: “Where's the money coming from? I appreciate that you want to give money back, but if you could just lower things, that'd be better.”

The discussion emphasized two central problems with relying on tariffs to eliminate income tax: (1) the scale of revenue collected from tariffs today is far smaller than income-tax receipts, and (2) heavy tariffs would act like a regressive tax, disproportionately hitting consumers — including many households that currently pay no federal income tax. Panelists said policymakers would need far more detailed plans to fill the fiscal gap without raising costs for ordinary Americans.

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