The former U.S. president and Republican front-runner for the 2024 presidential election, Donald Trump, recently criticized U.S. aid to Ukraine. In addition he proposed a controversial economic plan during his visit to Capitol Hill on Thursday, June 13. Hence, Trump suggested replacing the U.S. income tax with increased tariffs, a move that attracted criticism from David Schwartz, Chief Technology Officer at Ripple.

Income Tax & Tariffs Proposal

Trump presented this idea during separate meetings with House and Senate Republicans, aiming to unify the party ahead of the upcoming November election. Representatives Thomas Massie and Marjorie Taylor Greene confirmed Trump’s proposal.

Trump’s plan involves reducing the U.S. income tax and compensating for the lost revenue by raising tariffs on imported goods. The recent proposal by Trump to replace income tax with tariffs aims to reduce the tax burden on American citizens and shift it to foreign companies and governments.

Meanwhile, Trump urged the U.S. lawmakers for a cut in the taxes collected from tips. Earlier, during his tenure, Trump leveraged tariff revenue aggressively with rates touching a massive 25% for products from China. The recent declaration has gotten praise from the general public, however, others have voiced concerns.

This suggestion has sparked significant debate among lawmakers and economic experts. Netizens have raised concerns around the potential negative impacts on the U.S. economy. If the income tax proposal by Trump becomes a reality, it could even lead to the downfall of the U.S. Dollar (USD), which is the backbone of the U.S. dominance in the world.

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Ripple CTO Condemns Tax Policy Proposal

One user on X (formerly Twitter) reacted to Trump’s proposal, questioning the need for taxes if the government can simply print more money. Thereafter, Ripple CTO Schwartz, responded with a stark warning about the potential economic consequences.

Schwartz explained, “They can only print money because taxes create a demand for money. Without taxes, you could avoid paying for government by not using dollars.” Moreover, the Ripple CTO cautioned that without the demand created by taxes, the value of the U.S. dollar could rapidly decline.

“Without taxes, you could avoid paying for government by not using dollars, leading to the dollar rapidly becoming worthless because nobody would want it,” remarked Schwartz. In addition, the Ripple CTO elaborated on his analogy by comparing the government to a tech company and the economy to its users.

“Think of government like a tech company and the economy like users. You can stay afloat for a while even if you can’t monetize your users. But eventually, you have to demonstrate you can monetize your users or you collapse like an overvalued house of cards.”

This response highlights the essential role of taxes in maintaining the value of a currency. By ensuring demand for the U.S. dollar through taxation, the government supports the currency’s stability. Without this mechanism, the economic structure could face severe instability, potentially leading to a devaluation of the dollar. This would lead to de-dollarization, ultimately weakening the United States’ position.

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