Unless you were completely unplugged at the beach last week, you couldn’t avoid former President Trump’s newest campaign idea: replacing income taxes with tariffs. Unfortunately, it would take a tariff rate of approximately 71% to generate the $2.2 trillion in revenue that income taxes brought in for the federal government in 2023, according to Bryan Riley of the National Taxpayers Union.
Huffington Post has more on this topsy-turvy math equation:
Currently, tariffs bring in only a small portion of the $4.4 trillion in revenues the U.S. government brings in every year. According to the Treasury Department, annual Customs duties, which include tariff payments, amounted to $88.3 billion in the 2023 fiscal year. Income taxes, on the other hand, raised more than 20 times as much, $2.2 trillion.
To bring tariff revenues anywhere close to income tax levels would seem to require hefty boosts in tariffs well beyond the 10% Trump initially proposed.
Paul Krugman, the liberal New York Times columnist and winner of the Nobel Prize in economics, gave a quick estimate in a social media post: “I’ll have to write this up in detail, but my first-pass estimate is that this would require an *average* tariff rate of 133 percent.”
Within hours of Trump’s appearance at the GOP meeting on Capitol Hill Thursday, his campaign was walking back Trump’s “all tariff policy” idea – likely due to negative criticisms and reactions like the ones published in MarketWatch and Sourcing Journal.
In other news, Republican National Committee spokesperson Anna Kelly pushed back on characterizations that Trump's pledge to enact a 10% across-the-board tariff on imports and a 60% tariff on Chinese imports would amount to a tax increase for American households. Nancy Cook from Bloomberg reports that Kelly said "the notion that tariffs are a tax on US consumers is a lie pushed by outsourcers and the Chinese Communist Party."