Trump Launching External Revenue Service, Replacing IRS
President Trump plans to launch the External Revenue Service to collect tariffs, aiming to reduce American taxes by leveraging foreign revenue. Critics argue this new agency is unnecessary since U.S. Customs and Border Protection already handles tariff collection, and high tariffs could harm the economy. Despite these concerns, Trump believes the External Revenue Service will generate significant revenue and eventually help phase out the IRS.
President Trump has been cutting federal agencies left and right in order to eliminate what the Department of Government Efficiency (DOGE) deems as unnecessary spending.
During a cabinet meeting on Monday, Commerce Secretary, Howard Lutnick announced the Trump administration would be launching the "External Revenue Service". He also expressed his excitement for April 2, which Trump has named "liberation day".
The Trump administration has been promoting liberation day as a day that many promised tariffs will go into effect. However, in the cabinet meeting, Trump stated, "I may give a lot of countries breaks."
With all these new tariffs going into effect, the Trump administration is planning to launch the External Revenue Service as a new tariff-collecting agency.
Purpose of the External Revenue Service
During Trump's inauguration speech, he stated that this new agency would be tasked with collecting "all tariffs, duties, and revenues." This proposal was initially outlined in a post on Truth Social, where Trump wrote that the U.S. would begin charging countries that benefit from trade with the U.S. to ensure they pay their "fair share."
Currently, U.S. Customs and Border Protection (CBP) is responsible for collecting tariffs at ports of entry across the country. However, it remains unclear whether the proposed External Revenue Service would take over this responsibility from CBP.
Trump has issued a memorandum titled "America First Trade Policy," which instructs the Secretaries of Treasury, Homeland Security, and Commerce to investigate the possibility and implementation of this new agency.
The administration has not yet provided specifics on how this transition would work or its impact on current trade processes. As a result, there is ongoing uncertainty about the future role of CBP in tariff collection and how the External Revenue Service would fit into the current system.
Despite these uncertainties, the Trump administration contends the new agency will expedite the collection of tariffs and eventually lead to lower taxes for Americans.
What Would Happen to the IRS?
If there is soon to be an External Revenue Service, then what would happen to the Internal Revenue Service?
During an interview, Lutnick stated that Trump's goal was to "abolish the Internal Revenue Service and let all the outsiders pay". Instead, the External Revenue Service would facilitate the transition.
Trump said during Monday's cabinet meeting, "It's an interesting term right—the External Revenue Service? We're going to take in a lot of money from the outside and that's going to keep our taxes low, and I think getting a lot lower. It's going to be a lot of money. The external will take care of the internal to a large extent."
However, not everyone agrees with the president. Kimberly Clausing, economists and tax policy professor stated the External Revenue Service is "deeply impractical".
Clausing stated, "First, we already have a Customs and Border Protection office … including officials who collect tariffs. Second, it seems like an odd move for an Administration supposedly focused on efficiency to suggest a redundant government agency as a solution. Even very high tariffs could only replace a minority of the revenue raised by income taxation, and such high tariffs would cripple the economy."