A smarter, fairer alternative to tariffs and income tax.

The premise of tariffs is intuitive: tax foreign goods so domestic ones win. The mechanics in practice are anything but. Tariffs raise prices for the consumers they claim to protect, invite immediate retaliation that hammers domestic exporters, distort supply chains in ways that take decades to unwind, and politically reward the loudest industries rather than the most productive ones.

The premise of income tax is equally intuitive: tax what people earn, fund the things society needs. The mechanics are equally broken. Income tax punishes the act of being productive, requires an army of accountants and a hundred million annual filings to enforce, leaks revenue through every loophole the well-resourced can buy, and creates an adversarial relationship between citizens and the state that nobody actually wants.

Both systems are structurally bad. Patching them is theater. So here's a different idea, and I'm not the first to propose a version of it: tax transactions, not earnings or borders.

The proposal in one paragraph

Replace income tax and tariffs with a small, broad-based tax on every economic transaction. Not just retail sales (that's a sales tax and it's regressive). Every transaction: business-to-business, financial trades, capital movement, salary payments, the works. Set the rate low enough that nobody notices a single transaction, broad enough that aggregate revenue exceeds what the current system produces, and automated enough that compliance is near-zero. The IRS shrinks. The accountants pivot. The economy stops bleeding around the edges.

Why it works on paper

Three reasons.

One: the tax base is enormous. Total U.S. transaction volume in a given year is somewhere in the hundreds of trillions of dollars when you count every dollar that moves through the financial system. A fraction of a percent on that base is more revenue than income tax produces today.

Two: nobody has to file. The tax is automatically deducted at the point of transaction by the banks, exchanges, and payment processors that already track every dollar moving. The compliance cost approaches zero because the infrastructure already exists.

Three: it can't be hidden offshore. Income tax fails when wealth gets shifted to lower-tax jurisdictions. A transaction tax fires the moment money touches a regulated rail. The well-resourced lose their hiding spots, the rest of us stop paying for the gap.

The objections

The honest pushback is that this hits high-frequency traders disproportionately. Good. If you're moving billions of dollars through algorithmic arbitrage to extract microscopic spreads, you're contributing to system fragility and you should pay for it. A small per-transaction friction also dampens the speculative noise that nobody wanted in the first place.

The second objection: it's regressive at face value. Lower-income households touch their money more frequently relative to total wealth than the rich do. Easy fix: exempt transactions under a threshold (say, the first $50K of an individual's annual transaction volume), and the regressive edge disappears.

The third objection: it's politically impossible. That's true today. It will keep being true until someone makes the case loud enough that the alternative (perpetual brinkmanship over tariffs and a 70,000-page tax code) looks worse.

Tariffs aren't a tool, they're a tantrum

Here's the part that bothers me most. The current tariff escalation isn't even good tariff policy. There's no industrial strategy behind it, no analysis of which sectors actually benefit, no consideration of the second-order effects on agricultural exports or input costs for domestic manufacturers. It's a leader holding a hammer and announcing that everything is a nail.

Real industrial policy is hard. It requires identifying strategic capabilities, investing for decades, protecting nascent industries with surgical precision, and then letting them stand on their own. The countries that have actually built strong domestic industries did it with patience and craft. Sweeping tariffs are the opposite of craft. They're the act of someone who doesn't want to do the work.

What I'd actually want

I'm not naïve enough to think a transaction-tax system will replace the current mess overnight. But I'd want a serious conversation to start. A pilot. A model. A proper analysis of the second-order effects. A debate that isn't filtered through "who's winning this week."

The world is tilted toward complexity for its own sake. The tax code, the tariff schedules, the compliance industry: none of it is doing what it claims to do. We can fight back, but only if we're willing to imagine what the saner version looks like and demand it.

This essay isn't that demand. It's a sketch of one shape it could take.