President-elect Donald Trump unveiled his proposal for a new government entity dubbed the External Revenue Service (ERS), which aims to collect tariffs and duties from foreign nations. This announcement was made ahead of his inauguration on January 20, marking the beginning of his second term in office. The creation of the ERS is expected to be part of a series of executive orders intended to significantly alter U.S. tax policy.
Traditionally, establishing a new government agency requires congressional approval, and it remains unclear whether the ERS will function on a federal level. In a post on Truth Social, Trump expressed dissatisfaction with the current tax system, stating, “For far too long, we have relied on taxing our great people” through the existing Internal Revenue Service (IRS). He criticized previous trade agreements for undermining the U.S. economy and pledged a shift towards a more aggressive tariff strategy.
The ERS is envisioned to primarily enforce Trump’s proposed tariffs, which include a broad 20% tariff on all imports and a more stringent 100% tariff on goods from China. However, critics point out that the U.S. already has agencies, such as U.S. Customs and Border Protection, that handle the collection of tariffs. There are concerns about how this new agency would coexist or integrate with existing structures.
While the proposed tariffs could potentially raise approximately $2.8 trillion over the next decade, experts and non-partisan economists caution that this revenue would not be sufficient to replace income taxes or fund substantial tax cuts. Furthermore, Trump’s proposal has encountered swift criticism from various quarters, including Senator Ron Wyden, who labeled the ERS a “silly rebranding” that could result in a tax increase for American families and businesses.
Interestingly, the ERS proposal appears to conflict with the goals of the Department of Government Efficiency (DOGE), a new initiative co-led by Tesla CEO Elon Musk and entrepreneur Vivek Ramaswamy, aimed at reducing government bureaucracy. The introduction of another agency could add complexity to efforts to streamline federal operations.
As the Trump administration prepares for its first 100 days, the implications of these tax policy changes could resonate significantly with the financial realities faced by citizens. It remains crucial for Americans to stay informed on these developments.
Overall, while the proposal for the External Revenue Service may aim to reshape economic strategies, its feasibility and impact continue to be subjects of contention and discussion.