{"id":2273197,"date":"2024-06-21T05:14:02","date_gmt":"2024-06-21T09:14:02","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/a-shift-away-from-income-taxes-is-good-but-trumps-tariff-math-doesnt-add-up\/"},"modified":"2024-06-21T05:30:56","modified_gmt":"2024-06-21T09:30:56","slug":"a-shift-away-from-income-taxes-is-good-but-trumps-tariff-math-doesnt-add-up","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/a-shift-away-from-income-taxes-is-good-but-trumps-tariff-math-doesnt-add-up\/","title":{"rendered":"Reducing income taxes is beneficial, but Trump&#8217;s tariff calculations are flawed"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"float:left\"><div class=\"counts mashsbcount\">22<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fa-shift-away-from-income-taxes-is-good-but-trumps-tariff-math-doesnt-add-up%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=2273197&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>The main focus of the\u2062 text is the potential expiration of the Tax Cuts and Jobs Act by \u200d2025 and a proposal by former President\u2062 Donald Trump to\u2063 replace income taxes with\u200d tariffs on imports. Trump suggested this drastic change in a \u2064recent meeting with Republican lawmakers,\u2062 implying a shift from taxing \u2062earnings to taxing consumption, which could \u2062simplify\u200d the tax system and potentially invigorate economic growth by encouraging saving and investment.<\/p>\n<p>However, the feasibility of completely replacing income tax revenue with tariffs is questioned. The \u2063text points\u200c out that \u200creplacing \u200dthe $2.2 trillion collected from personal \u200dincome taxes \u2064would require a very high\u2063 tariff rate on the\u2063 $3.9 trillion worth of goods imported \u200binto the U.S., potentially over \u206460%. Such high tariffs could lead to\u200b international trade\u2062 wars and could\u200d be problematic as other countries might retaliate, leading to a further need for increased tariffs.<\/p>\n<p>Moreover, the summary \u2064of the federal government\u2019s revenue \u2063reveals that tariffs currently make \u2062up a relatively small portion of total federal income, and hence, relying solely on\u200c tariffs could be insufficient without implementing additional forms of\u2064 consumption taxes. The text critiques the practicality and sustainability of Trump\u2019s\u200b proposal, indicating significant economic repercussions and complexities in solely using\u2062 tariffs as a substitute \u200dfor income tax.  <\/p>\n<p class=\"readmore\">\n    <button onclick=\"showReadMore()\" id=\"readmorebtn\">Read more&#8230;<\/button>\n<\/p>\n<hr id=\"line\">\n<span id=\"more\"><\/p>\n<div>\n<p>With primary provisions of the 2017 <a href=\"https:\/\/www.washingtonexaminer.com\/tag\/tax-cuts-and-jobs-act\/\" target=\"_blank\" rel=\"noopener\" title>Tax Cuts and Jobs Act<\/a> set to expire come 2025, either <a href=\"https:\/\/www.washingtonexaminer.com\/tag\/joe-biden\/\" target=\"_blank\" rel=\"noopener\" title>President Joe Biden<\/a> or <a href=\"https:\/\/www.washingtonexaminer.com\/tag\/donald-trump\/\" target=\"_blank\" rel=\"noopener\" title>President Donald Trump<\/a> will face a showdown in Congress to extend the tax cuts or let them die. But the former president has reportedly teased a plan to entirely sidestep this dilemma over his signature domestic achievement. In recent closed-door remarks to Republican lawmakers at the Capitol Hill Club, Trump proposed replacing our income tax leviathan with a massive expansion of <a href=\"https:\/\/www.washingtonexaminer.com\/tag\/tariffs\/\" target=\"_blank\" rel=\"noopener\" title>tariffs<\/a> on imports.<\/p>\n<p>It goes without saying that as with all of his propositions, Trump\u2019s scheme to replace personal income taxes with an expanded tariff regime is subject to change. It could be scaled back or even discarded at the pleasure of the presidential hopeful. But considering that Trump has <em>not<\/em> blasted reporting on this proposal as fake news, it\u2019s worth evaluating it seriously.<\/p>\n<p>As an abstraction, replacing the taxation of income with the taxation of consumption would increase broader economic growth without necessarily reducing government tax revenue. While personal income taxes punish earnings, consumption taxes penalize spending, which in turn means they incentivize saving and investment. Whereas the personal income taxation system puts the onus on individuals to tally up their tax bill under the penalty of potential prison time if they get it wrong, consumption taxes are paid at the point of purchase, meaning that companies, not consumers, would be responsible for levying the correct amount.<\/p>\n<p>On its face, that seems a dramatic improvement over the current complexity of the federal tax code, which is so long that even the left-leaning PolitiFact <a href=\"https:\/\/www.politifact.com\/factchecks\/2017\/oct\/17\/roy-blunt\/tax-code-so-long-nobodys-really-sure-its-length\/#:~:text=%22In%201955%2C%20the%20Internal%20Revenue,an%20independent%2C%20nonprofit%20think%20tank.\" target=\"_blank\" rel=\"noopener\" title>concedes<\/a> that \u201cnobody\u2019s sure of its length.\u201d<\/p>\n<p>Yet the math behind Trump\u2019s proposal doesn\u2019t add up even with the most conservative estimate. In practice, a universal tariff on imports would cost an increasing amount over time as it triggers inevitable trade wars and stokes dissension among U.S. allies.<\/p>\n<p>In the last fiscal year, the <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/terrence-p-jeffrey-biden-has-increased-debt-33521-per-income-tax-payer\/\" title=\"Terrence P. Jeffrey: Biden Has Increased Debt ,521 Per Income Tax Payer\">federal government collected <\/a>.4 trillion, and a whopping $2.2 trillion of that came just from <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/zoom-profits-in-2020-660-million-zoom-tax-payment-in-2021-0\/\" title=\"Zoom Profits in 2020: 0 Million. Zoom Tax Payment In 2021: federal income taxes.\">federal income taxes<\/a>. Another $1.6 trillion came from payroll taxes, $420 billion from <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/how-will-joe-bidens-tax-hike-impact-average-americans\/\" title=\"How Will Joe Biden\u2019s Tax Hike Impact Average Americans?\">corporate income taxes<\/a>, and just $80 billion from customs or <a href=\"https:\/\/www.washingtonexaminer.com\/tag\/tariffs\" target=\"_blank\" rel=\"noreferrer noopener\">tariffs<\/a>. This revenue totaled 16.5% of the United States\u2019s gross domestic product, on par with the\u00a016.6% average from 2003 to 2022.<\/p>\n<p>Last year, the U.S. imported $3.9 trillion worth of goods. By my calculations, to replace $2.2 trillion in lost personal income tax paid to the federal government, we would need to tax $3.9 trillion of imports at an average rate of more than 60%. Liberal <em>New York Times<\/em> columnist and Nobel Prize-winning economist Paul Krugman says that to account for the reduced demand for imports that would result from tariffs, the average tariff rate would need to be 133%, but as usual, take anything and everything said by Krugman with a grain of salt.<\/p>\n<p>Hypothetically, to entirely replace the revenue generated by personal income taxation, all imports would need to be tariffed at an average rate of more than 60%. Still, as other nations inevitably retaliate and our demand for imports drops, that average tariff rate would have to dramatically increase over time.<\/p>\n<p>Creating other kinds of consumption taxes, such as value-added tax or luxury taxes, could work alongside tariffs on imports to much more realistically amount to the $2.2 trillion in lost revenue from federal income taxes. But as seen with Biden\u2019s green subsidy regime for electric vehicles and the like, a consumption tax is much more subject to political manipulation than the income tax regime. Whereas an increase to a marginal tax rate must apply to all earnings within a certain tax bracket, you could imagine Democrats trying to pass an excise tax on firearms while Republicans try to pass one on lab-grown meat. While the courts would have to litigate whether a VAT violates the 14th Amendment in the case of disparate impact or the <a href=\"https:\/\/www.washingtonexaminer.com\/tag\/second-amendment\/\" target=\"_blank\" rel=\"noopener\" title>Second Amendment<\/a> in the firearm example, the political theater alone could create chaos in the markets.<\/p>\n<p><a href=\"http:\/\/washingtonexaminer.com\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER<\/strong><\/a><\/p>\n<p>The real reason Trump\u2019s plan falls flat is that it fails to address the spending problem slated to skyrocket. In the last fiscal year alone, federal outlays amounted to $6.1 trillion, $3.8 trillion of which was mandatory spending, entitlements such as Social Security and Medicare. And while we only spent $700 billion paying off our interest on the $35 trillion national debt, we\u2019re on pace to spend a minimum of $1.2 trillion on interest this year thanks to bond market panic over Bidenomics and persistent inflation. By 2034, the nonpartisan Congressional Budget Office projects annual federal spending will surpass $10 trillion. A radically expanded tariff regime would likely reduce the total import base from $3.9 trillion, which is already too low, to replace the $4 trillion the CBO projects will be generated by personal income taxes in 2034.<\/p>\n<p>Few would clamor to save an <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/61-of-americans-paid-no-income-tax-in-2020-report\/\" title=\"61% Of Americans Paid No Income Tax In 2020: Report\">income tax system<\/a> as complicated as ours. Yet mere mercantilism results in the least effective form of consumption taxation and not nearly enough revenue to be feasible in practice.<\/p>\n<\/p><\/div>\n<p><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key provisions of the 2017 Tax Cuts and Jobs Act are expiring in 2025. Either President Joe Biden or former President Donald Trump will confront a congressional battle to extend these cuts. Trump has hinted at a plan to completely avoid this issue during his potential second term<\/p>\n","protected":false},"author":2693,"featured_media":2273198,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/www.washingtonexaminer.com\/wp-content\/uploads\/2024\/06\/AP23315564352759.webp","fifu_image_alt":"","footnotes":""},"categories":[538],"tags":[],"class_list":["post-2273197","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-washington-examiner"],"fifu_image_url":"https:\/\/www.washingtonexaminer.com\/wp-content\/uploads\/2024\/06\/AP23315564352759.webp","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2273197","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/2693"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=2273197"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2273197\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2273198"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=2273197"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=2273197"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=2273197"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}