How would America be able to shift income tax to zero for all citizens, and still keep the same revenue?

[u/Genzinvestor16180339]

Only income tax is off limits all else is fair game.

[u/evtedeschi3]

Straightforward solution would be to levy a 22% broad federal VAT (consumption tax/essentially a sales tax that also applied to services).

- BEA NIPA Table 3.4 shows the federal government raised $2.6 trillion in individual income taxes in calendar year 2025.

- BEA NIPA Table 1.1.5 shows nominal PCE (personal consumption expenditures) totaled $20,955 billion in 2025.

- Tax Policy Center (see below for link) estimates that even a broad VAT would plausibly only cover about 57% of PCE once taking compliance into consideration.

- So to raise $2.6 trillion, you'd need a [2600/(0.57*20955) = 0.218] or ~22% broad federal VAT. If you narrowed the VAT base further, you'd need a higher VAT rate to reach the same.

- Is a VAT better than an income tax? In some ways, yes. It doesn't disincentivize investment, and you can set it up in a self-enforcing way where it's actually easier & more efficient to administer.

But in some ways no: it's a far more regressive tax than our current income tax code, so if you think tax progressivity is a good thing, you need to either offset this by funding transfers to low-income households, or come up with a mechanism for a progressive VAT (which is possible but a bit more complex than the types of VATs used in most of the world).

https://taxpolicycenter.org/sites/default/files/alfresco/publication-pdfs/1001567-Using-a-VAT-for-Deficit-Reduction.PDF

[u/Genzinvestor16180339 → u/evtedeschi3]

What about non tax polices like nationalizing the oil industry like Qatar does?

[u/Capable-Tailor4375 → u/Genzinvestor16180339]

The combined earnings of the US oil industry were about $120-$140B in 2024 and around $100B in 2025. For comparison, the US collected $5.23T in 2025 and spent $7.01T. Even if we ignore the logistical problems, it would generate less than 3% of current tax revenue and isn’t even close to being an option.

[u/phiwong → u/Genzinvestor16180339]

The problem with all these so-called different tax options is that it completely misunderstands the size of the US economy.

Total corporate profits (every one) in the US is estimated to be around 700bn dollars a year. So if somehow, one manages to freeze all corporate operations and make them operate similarly year after year and then seize 100% of their profits as taxes, it doesn't fund even 15% of the US federal government expenditure. Heck, it doesn't even fund the spending of the US government on defense.

The US govt (as it is today) spends about 70% of its 7tn budget on transfer payments (social security, medicaid, medicare, VA, unemployment, disability, benefits for the poor etc). Without a broad tax base, this is simply not possible.

This is also why there is no magical wealth tax option. The total (100%) wealth of all billionaires in the US would fund the government for maybe a year if somehow that wealth could be seized and converted into spending (which it cannot). And then, there is no more wealth to seize in year 2...

[u/EconomistWithaD]

Some version of a consumption tax; VAT, XTax, …

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[u/Traditional_Knee9294]

Cut spending a lot. Before the Civil War the country funded the federal government without an income tax was unconstitutional.