President-elect Donald Trump announced plans to create a new government agency called the External Revenue Service (ERS) to collect tariffs and other duties from foreign nations.
Trump plans to launch the agency on Jan. 20, the day he takes office as president for his second term. The pledge suggests the ERS creation may be part of the many executive orders anticipated for his first day in office that aim to reshape U.S. tax policy.
Historically, creating a new government agency requires an act of Congress. It's worth noting that Trump hasn't specified whether this agency will be federal.
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“For far too long, we have relied on taxing our great people using the Internal Revenue Service (IRS),” the Republican said in a post on Truth Social. “Through soft and pathetically weak Trade agreements, the American Economy has delivered growth and prosperity to the World, while taxing ourselves. It is time for that to change.”
The so-called External Revenue Service would support the president-elect’s bold tariff plans on all imports. However, there are already government agencies that collect said fees.
The comments also come days after House GOP lawmakers introduced a bill proposing to abolish the IRS and rewrite the tax code as we know it. Here’s what we know about the ERS so far.
What is the External Revenue Service?
As the president-elect suggests, the External Revenue Service would be implemented to collect “tariffs, duties, and all revenue” that come from foreign sources. As implied, the agency would focus on collecting the major tariffs the Trump administration aims to impose.
One glaring concern: the U.S. already has federal agencies that collect these fees.
Trump hasn't specified whether the proposed agency would replace the U.S. Customs and Border Protection collections of tariffs, duties, fees, and fines or the collection of taxes on foreign income by the IRS.
For most of his campaign, Trump has pitched a steep 20% blanket tariff on all imports and an extra-punitive 100% fee on Chinese goods entering the U.S. He believes that tariffs will import taxes, or crucial revenue into the economy — allowing the government to lower food prices, inflation, and reduce the national deficit.
At one point, the president-elect also floated replacing income taxes with tariff revenue, adding that tariffs would allow the government to subsidize childcare.
While the proposed tariffs would raise about $2.8 trillion over the next decade, government agencies and multiple non-partisan economists warn the revenue wouldn’t come close to replacing income tax or funding other tax cuts.
Trump ERS plans face immediate backlash
Trump’s proposed External Revenue Service faced instant backlash from social media and top Democrats.
Sen. Ron Wyden of Oregon, a top Democrat on the Senate Finance Committee said the proposed External Revenue Service was a “silly rebranding” that would fail to hide “a multitrillion-dollar tax hike on American families and small businesses to pay for another round of tax handouts to the rich.”
In another post on social media platform X, a White House Correspondent for the Independent said the president-elect appeared “ignorant” to the fact there’s been an “external revenue service” since July 31, 1789. In other words, the U.S. Customs Service, now known as the U.S. Customs and Border Protection.
Of note, the proposed External Revenue Service seems to be somewhat at odds with the mission of Trump’s newly created Department of Government Efficiency (DOGE).
The non-governmental entity co-led by Tesla CEO Elon Musk and entrepreneur Vivek Ramaswamy, aims to “dismantle government bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure federal agencies,” according to the president-elect.
The creation of a new government entity appears to add more bureaucratic hoops to their pile.
With only days until Inauguration Day, the new Trump administration may continue to develop plans for what lies ahead as they tackle the first 100 days in office. Some plans may cause an immediate impact on your finances or tax experience, so stay informed.
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