President-elect Donald Trump has announced the establishment of a new agency called the External Revenue Service (ERS) aimed at collecting tariffs and duties imposed on foreign nations. This initiative is set to kick off on January 20, coinciding with his inauguration for a second term. The ERS is expected to be part of a series of executive orders aimed at overhauling U.S. tax policy.
Traditionally, the creation of a new federal agency requires congressional approval, and it remains unclear whether the ERS would operate on a federal level. Trump emphasized the need for this agency in a post on Truth Social, highlighting a long-standing reliance on the Internal Revenue Service (IRS) for taxation and asserting that weak trade agreements have harmed the American economy.
The ERS would primarily focus on the collection of tariffs, duties, and revenues from international sources, supporting Trump’s proposed tariffs, including a blanket 20% tariff on all imports and a particularly steep 100% tariff on Chinese goods. He argues that such tariffs would not only generate significant revenue—estimated at about $2.8 trillion over the next decade—but also allow for reductions in food prices, inflation, and the national deficit. There are even indications that Trump is considering substituting income taxes with revenue generated from tariffs.
However, concerns have already surfaced regarding the ERS. Critics, including Senator Ron Wyden, have dismissed the proposal as a “silly rebranding” of existing tax collection efforts and have raised alarms over potential increases in taxes for American families and small businesses. Additionally, there are worries that the creation of the ERS may contradict the objectives of Trump’s newly proposed Department of Government Efficiency, which aims to streamline government processes and reduce bureaucracy.
As the Trump administration heads toward its inauguration, discussions around the impact of these tax plans are likely to remain in the spotlight, with potential ramifications for the financial landscape of the country.
In summary, Trump’s proposed External Revenue Service is part of a broader tax strategy, yet it faces significant scrutiny and opposition based on existing government structures and the potential economic impact on American families. The situation reflects both the challenges and complexities involved in reshaping U.S. tax policy, a critical issue as the new administration prepares to take office.