Replace Income Tax with Tariffs?

[Dill]

Cool idea here. Imagine having no Federal Personal income tax!!  

"How we going to fund the government then, pay for defense and roads, etc?" 

Eezy peezy--Tariffs!! Make China and Mexico pay our income tax for us. 
So the US budget needs about 5 trillion a year, about half comes from income tax,
so we'd need 2.5 trillion. Last year all tariffs together only brought in about 70 billion.
This Insana guy says you'd have to double tariff on all imports to get close to the money needed.
https://www.mediamatters.org/media/4021036

So if Trump doubles the cost of foreign-made autos, then the price of that $40,000.00 made-in-Mexico car I wanted to buy 
would jump to 80,000. And MEXICO would have to pay the tariff! That's how tariffs work, right?  Plus I'd save a few thousand 
in tax payments. 

I don't know much about economics, and people trust Republicans more than Dems on the economy. 
So I'd like to hear from my forum friends who run businesses. How credible is this proposal? 
Could this measure bring down inflation?  Where's Justwin? He knows all about this money stuff. 
.................................................................................................................................................................................................................................
Trump floats eliminating U.S. income tax and replacing it with tariffs on imports
https://www.cnbc.com/2024/06/13/trump-all-tariff-policy-to-replace-income-tax.html

KEY POINTS
Donald Trump discussed the idea of imposing an “all tariff policy” that would ultimately enable the U.S. to get rid of the income tax, sources told CNBC.

He also talked about using tariffs to leverage negotiating power over bad actors, according to another source in the room.

Trump championed tariffs during his first term in the White House.

Donald Trump on Thursday brought up the idea of imposing an “all tariff policy” that would ultimately enable the U.S. to get rid of the income tax, sources in a private meeting with the Republican presidential candidate told CNBC.
Trump, in the meeting with GOP lawmakers at the Capitol Hill Club in Washington, D.C., also talked about using tariffs to leverage negotiating power over bad actors, according to another source in the room.

The remarks show Trump, who championed tariffs as a foreign policy multi-tool during his first term in office, is considering a drastically more protectionist trade agenda if he defeats President Joe Biden in November.
Spokespeople for Trump’s campaign did not immediately respond to CNBC’s requests for comment. Trump in a Truth Social post later Thursday morning said there was “lots discussed, all positive” in the meeting, without providing any more details.
Trump’s remark about replacing income taxes with tariffs quickly drew critics.
“Broadly substituting tariffs for income tax is a sure way to hit hard low and middle income Americans and reward top,” New York University School of Law professor David Kamin wrote on X.

Washington Post op-ed columnist Catherine Rampell noted that since tens of millions of Americans who pay no federal income taxes would presumably fall under Trump’s tariff plan, “this sounds like a huge tax increase on the lower/middle income classes.”
Trump’s swing through Capitol Hill to meet with Republican lawmakers and business leaders marked his first return to the area since Jan. 6, 2021, when the then president urged his supporters to march to the U.S. Capitol to protest his 2020 loss to Biden.
Trump was later impeached in the House for inciting the violent mob that stormed the Capitol and temporarily halted the peaceful transfer of presidential power.

[NATI BENGALS]

If I had rich friends. They would love this idea.

Something tells me when the price of everything goes up the lower and middle class may just about break even with the tax savings compared to higher costs. But the Richard’s…. Maybe I need to start a business building Scrooge Mcduck swimming pools.

[CJD]

(06-20-2024, 01:09 AM)Dill Wrote: Cool idea here. Imagine having no Federal Personal income tax!!  

"How we going to fund the government then, pay for defense and roads, etc?" 

Eezy peezy--Tariffs!! Make China and Mexico pay our income tax for us. 
So the US budget needs about 5 trillion a year, about half comes from income tax,
so we'd need 2.5 trillion. Last year all tariffs together only brought in about 70 billion.
This Insana guy says you'd have to double tariff on all imports to get close to the money needed.
https://www.mediamatters.org/media/4021036

So if Trump doubles the cost of foreign-made autos, then the price of that $40,000.00 made-in-Mexico car I wanted to buy 
would jump to 80,000. And MEXICO would have to pay the tariff! That's how tariffs work, right?  Plus I'd save a few thousand 
in tax payments. 

I don't know much about economics, and people trust Republicans more than Dems on the economy. 
So I'd like to hear from my forum friends who run businesses. How credible is this proposal? 
Could this measure bring down inflation?  Where's Justwin? He knows all about this money stuff. 
.................................................................................................................................................................................................................................
Trump floats eliminating U.S. income tax and replacing it with tariffs on imports
https://www.cnbc.com/2024/06/13/trump-all-tariff-policy-to-replace-income-tax.html

KEY POINTS
Donald Trump discussed the idea of imposing an “all tariff policy” that would ultimately enable the U.S. to get rid of the income tax, sources told CNBC.

He also talked about using tariffs to leverage negotiating power over bad actors, according to another source in the room.

Trump championed tariffs during his first term in the White House.

Donald Trump on Thursday brought up the idea of imposing an “all tariff policy” that would ultimately enable the U.S. to get rid of the income tax, sources in a private meeting with the Republican presidential candidate told CNBC.
Trump, in the meeting with GOP lawmakers at the Capitol Hill Club in Washington, D.C., also talked about using tariffs to leverage negotiating power over bad actors, according to another source in the room.

The remarks show Trump, who championed tariffs as a foreign policy multi-tool during his first term in office, is considering a drastically more protectionist trade agenda if he defeats President Joe Biden in November.
Spokespeople for Trump’s campaign did not immediately respond to CNBC’s requests for comment. Trump in a Truth Social post later Thursday morning said there was “lots discussed, all positive” in the meeting, without providing any more details.
Trump’s remark about replacing income taxes with tariffs quickly drew critics.
“Broadly substituting tariffs for income tax is a sure way to hit hard low and middle income Americans and reward top,” New York University School of Law professor David Kamin wrote on X.

Washington Post op-ed columnist Catherine Rampell noted that since tens of millions of Americans who pay no federal income taxes would presumably fall under Trump’s tariff plan, “this sounds like a huge tax increase on the lower/middle income classes.”
Trump’s swing through Capitol Hill to meet with Republican lawmakers and business leaders marked his first return to the area since Jan. 6, 2021, when the then president urged his supporters to march to the U.S. Capitol to protest his 2020 loss to Biden.
Trump was later impeached in the House for inciting the violent mob that stormed the Capitol and temporarily halted the peaceful transfer of presidential power.

Trump seems to fundamentally not understand how tariffs affect the price of goods in America.

Or he thinks his supporters don't.

[JustWinBaby]

Hmmm, it's almost as if some of you intuitively understand that sales taxes trickle down to the consumer.

Now do corporate income taxes!

[*michaelsean*]

Well just skimming quickly, it seems we would have a shortfall because people would stop buying those products in many instances.

[Dill]

(06-20-2024, 12:19 PM)JustWinBaby Wrote: Hmmm, it's almost as if some of you intuitively understand that sales taxes trickle down to the consumer.

Now do corporate income taxes!

??? I thought sales taxes TARGETTED consumers. 

So what's your view of the tariff proposal Trump floated?  

Are your friends at the WSJ down with it?  

[Dill]

(06-20-2024, 08:51 PM)michaelsean Wrote: Well just skimming quickly, it seems we would have a shortfall because people would stop buying those products in many instances.

That doesn't sound like a "shortfall." The goods would be available.

But you raise another issue--if people buy less, especially the tariffed goods, 
then the Trump proposal would not be able to make up the loss in tax revenue. 

So deficit spending would have to jump to meet the shortfall, or Congress would have 
to consider cuts in government spending. Perhaps MASSIVE cuts. 

That would be an interesting experiment.

[JustWinBaby]

(06-21-2024, 02:58 PM)Dill Wrote: ??? I thought sales taxes TARGETTED consumers. 

So what's your view of the tariff proposal Trump floated?  

Are your friends at the WSJ down with it?  

Consumers don't pay tariffs, the importer does.  Maybe if you read the WSJ you'd know that. But it's telling you're dumping on the gold standard of financial/market/business news. Which, by the way, is as unbiased and apolitical of news as you're going to find (otherwise all the businesses and investors would quit reading it). Obviously I'm not talking about the editorial section.

Tariffs are usually viewed as anti-growth. But IMO, views may be evolving because I think economists are learning the benefit of trade and outsourcing can take a a few generations to bear fruit (what economists typically refer to as "transition costs", but that's usually considered a short-run effect of less than 5-10 years).

When tariffs are used as a result of dumping or illegal government subsidies (as many claim China does), opinions of economists are much more mixed.

[JustWinBaby]

(06-21-2024, 03:02 PM)Dill Wrote: That doesn't sound like a "shortfall." The goods would be available.

But you raise another issue--if people buy less, especially the tariffed goods, 
then the Trump proposal would not be able to make up the loss in tax revenue. 

So deficit spending would have to jump to meet the shortfall, or Congress would have 
to consider cuts in government spending. Perhaps MASSIVE cuts. 

That would be an interesting experiment.

No, it depends on whether people choose to save their money or purchase close substitutes.

Tariffs are generally considered inflationary.  Whether that is a net positive or net negative to government revenues depends on multiplier effects, but to the extent inflation slows growth revenues would take a slight dip.  But the purchasing power of the consumer would take a huge hit.

[Dill]

(06-21-2024, 04:10 PM)JustWinBaby Wrote: Consumers don't pay tariffs, the importer does.  Maybe if you read the WSJ you'd know that.

If an importer imports a $40,000 car and pays a $40,000 tariff,  for how much might he sell a car that cost him $80,000?

Would the WSJ tell me that importers pass on the cost of tariffs to consumers? Or stop importing? Save me a little time here.

(06-21-2024, 04:10 PM)JustWinBaby Wrote: Tariffs are usually viewed as anti-growth.  But IMO, views may be evolving because I think economists are learning the benefit of trade and outsourcing can take a a few generations to bear fruit (what economists typically refer to as "transition costs", but that's usually considered a short-run effect of less than 5-10 years).

When tariffs are used as a result of dumping or illegal government subsidies (as many claim China does), opinions of economists are much more mixed.

So this is still not all that clear. Are you saying that the "benefit" of Trump's proposed tariffs could manifest in a few generations? 

Remember, the proposal is that tariffs could replace personal income tax as a source of federal revenue. 

Are you implying the opinions of economists are not so "mixed" when it comes to tariffs which have nothing to do with "dumping" etc.?  

[Dill]

(06-21-2024, 04:18 PM)JustWinBaby Wrote: No, it depends on whether people choose to save their money or purchase close substitutes.

Tariffs are generally considered inflationary.  Whether that is a net positive or net negative to government revenues depends on multiplier effects, but to the extent inflation slows growth revenues would take a slight dip.  But the purchasing power of the consumer would take a huge hit.

No sure which statement the "no" refers to. All of them? The government would not have to meet an income shortfall through some other measure?

Seems to me growth revenues would take a quite a dip if, in addition to inflation, the government lost all revenue from personal income tax.

As to the bolded, I sense you might not favor replacing personal income tax with tariffs.  

Is there some "multiplier effect" which could might make it workable? 

[Dill]

(06-20-2024, 11:38 AM)CJD Wrote: Trump seems to fundamentally not understand how tariffs affect the price of goods in America.

Or he thinks his supporters don't.

Seems both could be true.

We are not hearing much from his supporters on this, at least in this forum,

but commentators on Fox and Newsmax have responded positively. 
https://www.nationalmemo.com/trump-taxes-2668538659

[*michaelsean*]

(06-21-2024, 03:02 PM)Dill Wrote: That doesn't sound like a "shortfall." The goods would be available.

But you raise another issue--if people buy less, especially the tariffed goods, 
then the Trump proposal would not be able to make up the loss in tax revenue. 

So deficit spending would have to jump to meet the shortfall, or Congress would have 
to consider cuts in government spending. Perhaps MASSIVE cuts. 

That would be an interesting experiment.

I meant shortfall in tax receipts. You can’t replace it with increased jobs because they won’t be paying income tax.