As we move deeper into December, fiscal debates are intensifying on several fronts. President Trump has revived a dramatic idea: replacing federal individual income taxes with tariff revenue. Global tax negotiations are facing new fractures as China and several EU nations push back on U.S. carve-outs.
Meanwhile, new data show just how much tariffs are costing American households, and the IRS is kicking off a campaign urging taxpayers to prepare early for a very different 2026 filing season under the One Big Beautiful Bill Act (OBBBA).
For tax advisors, the common thread is clear: policy volatility is accelerating, and clients will look to you to translate what today’s headlines mean for next year’s financial reality.
This week’s top developments:
- Trump suggests tariffs could replace the U.S. income tax
- Trade tensions escalate: Indonesia deal falters, farm aid expands
- China and EU countries block global minimum tax exemptions
- New analysis: tariffs have cost U.S. households $1,200 each in 2025
- IRS launches “Get Ready” campaign for the 2026 filing season
Let’s break down what matters for tax planning.
1. Trump Floats Replacing the Federal Income Tax With Tariff Revenue
At a December 2 Cabinet meeting, President Trump suggested the U.S. may one day eliminate federal individual income taxes, arguing that soaring tariff revenue could take its place. But tax experts quickly countered that the math doesn’t work.
Key numbers from CBS News reporting:
- Current tariffs would generate ~$2.1 trillion over 10 years (Tax Foundation)
- Federal income taxes generate ~$32 trillion over the same period
- The average U.S. household currently pays an effective 17% tariff rate on many goods
- Tariff revenue for FY25: $195 billion, far below income tax collections
Experts warn that:
- Tariffs are regressive, hitting low- and middle-income families hardest
- Attempting to scale tariffs high enough to replace income tax would cause imports to collapse, eliminating the revenue source
- A universal “tariff-funded tax cut” would overwhelmingly benefit the wealthiest Americans, who pay most of the current income tax burden
Trump also reiterated interest in a $2,000 “tariff dividend” payment to U.S. households, though analysts estimate such a program could cost $300–$600 billion, well above current tariff revenue.
Why it matters for advisors:
While unlikely to be enacted, this discussion signals continued volatility in Trump’s tax policy roadmap. Clients may ask whether income taxes could materially change—advisors should be prepared to explain the revenue mechanics and regressivity concerns.
2. Trade Turbulence Deepens: Farm Bailouts, Carveouts, and Deal Instability
This week brought a flurry of new tariff-related developments:
$12 billion in new aid for U.S. farmers
- Trump announced fresh support for growers grappling with weakened export markets and rising input costs.
- Soybean farmers in particular have been hit hard amid cooling demand from China.
Tariff carveouts may expand
- Trump signaled he may approve additional exceptions after rolling back duties on coffee, bananas, tea, beef, and tropical fruits last month to curb grocery inflation.
Indonesia trade deal at risk of collapse
- U.S. officials accuse Jakarta of backing away from commitments made in July.
Tariff revenue dips
- November revenue fell to $30.76B, the first decline since Trump’s sweeping tariffs began—partly due to the recent carveouts.
Backup plan if the Supreme Court strikes down IEEPA tariffs
- USTR Jamieson Greer said the administration could use “other tools” to replicate $200B in revenue if the Court rules against the current tariff authority.
Why it matters for advisors:
Trade policy will continue to influence costs for agriculture, manufacturing, logistics, and retail clients. Advisors may need to update Q1 projections quickly in response to shifting carveouts and revenue pathways.
Read the full Yahoo Finance update
3. Global Minimum Tax Negotiations Pit U.S. Against China and Europe
Talks on implementing the OECD’s global minimum tax system hit a major snag this week. China, the Czech Republic, Estonia, and Poland blocked a G7-backed plan that would grant U.S. multinationals significant exemptions from the regime.
What’s driving the dispute:
- China argues it deserves the same carveouts as the U.S.
- Poland and the Czech Republic oppose aspects related to tax incentives
- Estonia warns the rules could damage European competitiveness
The delay raises the risk that:
- The global minimum tax implementation deadline (end of 2025) may be missed
- The U.S. could revive a “revenge tax” targeting countries that implement the rules
- Multinationals will face prolonged uncertainty on cross-border tax liabilities
Why it matters for advisors:
Clients with global footprints (especially in tech, pharma, and manufacturing) need to prepare for divergent national regimes and potential retaliatory tax measures. Transfer pricing policies and effective tax rate projections may require revision.
4. New Report: Trump’s Tariffs Have Cost U.S. Households $1,200 Each in 2025
Democrats on the Joint Economic Committee released data estimating that American households have paid $1,198 each this year due to tariff-related price increases.
Key findings:
- U.S. consumers absorbed $159 billion in tariff costs from Feb–Nov
- Average tariffs have risen from 2.4% to 16.8%, the highest since 1935
- Economists estimate the total effect amounts to an annual tax increase of ~$1,700 per household
- Tariffs behave like a flat consumption tax, disproportionately hitting lower-income families
The White House maintains that tariffs are strengthening domestic manufacturing and securing investment commitments.
Why it matters for advisors:
This data will likely intensify client questions around inflation, cost-of-living pressures, and whether tariff policy could affect consumer demand—all key considerations for household planning and small business forecasting.
5. IRS Launches “Get Ready” Campaign for 2026: New OBBBA Rules Front and Center
The IRS is encouraging taxpayers to begin preparing early for the 2026 filing season—one that will be significantly reshaped by provisions of the One Big Beautiful Bill Act (OBBBA).
Notable OBBBA changes impacting 2026 filings:
- No tax on tips (deduction-based)
- No tax on overtime pay (deduction-based)
- No tax on Social Security benefits (deduction-based)
- No tax on car loan interest (deduction-based)
- Plus new credits, contribution rules, and expanded reporting requirements
IRS recommendations:
- Gather W-2s, 1099s, digital asset records, and bank information early
- Avoid filing before all documents are received
- Set up an IRS online account to access transcripts, authorize professionals, and manage payments
- Prepare for direct deposit to become the default refund method, as paper checks are phased out
Why it matters for advisors:
OBBBA creates both opportunities and complexities. Educating clients early (especially gig workers, seniors, and tip-based earners) will help avoid filing errors and mismatches that trigger IRS notices.
Your Takeaway This Week
This week’s news highlights how much the tax landscape continues to shift even as the year winds down.
Major themes to watch:
- Income tax debates could shape 2026 campaign narratives
- Trade uncertainty is affecting farm economics, consumer prices, and business planning
- Cross-border tax disputes may reshape global effective rates
- Tariffs continue to function as a de facto consumption tax
- OBBBA will introduce meaningful tax changes requiring client education early in 2026
For advisors, the next few weeks present an ideal time to refine year-end projections, revisit client cash-flow assumptions, and proactively communicate about filing-season changes.
Harness supports advisors navigating the intersection of tax policy, personal finance, and evolving regulations—providing resources to help you keep clients informed and confident.
Need help interpreting the latest tax shifts for your clients?
Schedule an introduction today.
Disclaimer:
Tax related products and services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness Wealth”. Harness Wealth Advisers LLC is a paid promoter, internet registered investment adviser. Registration does not imply a certain level of skill or training. This article should not be considered tax or legal advice and is provided for informational purposes only. Please consult a tax and/or legal professional for advice specific to your individual circumstances. This article is a product of Harness Tax LLC.
Content was prepared by a third-party provider and not the adviser. Content should not be regarded as a complete analysis of the subjects discussed. Although we believe the content is reliable, it is not guaranteed as to accuracy and does not purport to be complete nor is it intended to be the primary basis for financial or tax decisions.
This blog contains links to other web sites as a convenience to the reader. These include links to web sites operated by one or more of the following: government agencies, nonprofit organizations and/or private businesses. When you use any of these links, you are no longer viewing our material, and our Privacy Notice will not apply. When you link to another web site, you are subject to the privacy policy of that new site. When you follow a link to one of these sites neither Harness, nor any agent, officer, or employee of Harness warrants the accuracy, reliability or timeliness of any information published by these external sites, nor endorses any content, viewpoints, products, or services linked from these systems, and cannot be held liable for any losses caused by reliance on the accuracy, reliability or timeliness of their information. Portions of such information may be incorrect or not current. Any person or entity that relies on any information obtained from those web sites does so at her or his own risk.