Trump floats eliminating U.S. income tax and replacing it with tariffs on imports

CNBC ^ | June 13th, 2024 | Emily Wilkins and Kevin Breuninger

[shadowlands1960]

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.

[BroJoeK]

central_va: "Trump has not proposed eliminating payroll taxes (SS,MC) with a tariff. Only income taxes."

Income taxes generate roughly $2 trillion in revenues annually.
Total US imports now run about $4 trillion per year.
So, if we impose a historically average 25% tariff on imports, that could in theory generate $1 trillion in revenues, meaning at most it might reduce income taxes by half.

Yes, if we go up to 1828 Tariff of Abomination levels, or 1930 Smoot Hawley maximums, that could in theory produce $2 trillion in revenues and thus eliminate the need for income taxes.

However:

1. Such large increases in US tariffs would force a radical realignment of the world's economy, and not for the better, thus reducing US imports to the point where actual revenues will be far less than the theoretical $2 trillion.

2. The biggest US financial problem is not the source of Federal revenues, but rather the fact that Congress cannot, or will not, control spending enough to balance the budget and so eliminate inflation as an issue.

3. This means that changing the sourcing of revenues is like moving deck chairs on the Titanic -- it will not prevent the ship from sinking.

The bottom line is that, given today's profligate Federal deficit spending, increased tariff revenues could only ever be legitimately used to reduce the deficits, not to reduce other taxes, such as the income tax.

[BroJoeK]

centyral_va: "This puts you in a awkward positon, siding with the South and their anti tariff position.
If you want to see a service/agicultural society that imports all durable goods, and are in favor of that, then look no further than the CSA."

I do understand the ironies here, and am happy to point them out.

My position is that global trade with our close friends and allies is a good thing so long as we do not become overly dependent, and they do not take unfair advantage of us.

So, free trade must also be fair trade, and trade with our enemies can be very destructive, the more so as we become dependent on them.

[BroJoeK]

Reily: "Now that the discussion has stopped being serious and has degenerated into Yankee & Reb cats hissing at each other.
I have nothing more to say."

From Day One in 1789, tariffs were a major issue and on occasion became an existential threat to the nation -- i.e., the 1828 Tariff of Abominations.

For many years, tariffs have been a major point of debate over the causes of secession in 1860 and 1861.

Today US tariffs are controlled by treaties and laws, meaning major changes are not simple matters of "the stroke of a pen", but must be negotiated and approved, which usually takes many years.

The fundamental problems with free-but-not-necessarily-fair trade are:

1. It has destroyed whole industries of US manufacturing, making the US economy today 2/3 in "services" such as health care, education & government and only 1/3 in the manufacture and sales of "things".

2. "Free trade" has created enormous trade deficits, which weaken the US dollar and strengthen economies of potential enemies, like CCP China.
   In the case of China especially, US trade deficits fueled extraordinary economic growth, to the level of a near-peer adversary with a rapidly modernizing military threatening our friends and allies in the Indo-Pacific region.

3. As demonstrated during Covid, US dependence on less than friendly actors for critical pharmaceuticals is beyond unacceptable.

Bottom line is 1) a long historical context for discussion on tariffs and
2) modern treaties like GATT make major changes far from simple matters.

So, in general we want the benefits of free trade, but be don't want to be taken advantage of.
If increased tariffs can help with that -- or if just a credible threat of increased tariffs -- then it's something to consider, imho.

[frnewsjunkie]

All the lying dem ads.. This would clear up who cares and who uses.. Who is for you and who doesnt give a flip.

[DiogenesLamp]

The first US protective tariffs, in 1789 introduced by Pres. Washington and supported by Congressman James Madison, those had nothing to do with Chicago or DC.

My examination of the problem indicates it was a consequence of Alexander Hamilton's philosophy of using government to increase the wealth of industry.

This entire philosophy is different from Jefferson's, which is "Government governs best which governs the least."

Hamilton counseled activist government which took a role in Wealth creation, but in so doing, intertwined the interests of Industry (Corporations) with Government.

Now corporations had an interest in controlling government, because it had become a primary tool through which they could profit.

Hamilton started the idea, and by 1817, they were already using it to promote Northern interests at the expense of the South. (Navigation act of 1817.)

And it just got worse from there.

[central_va]

Smoot Hawley had almost no impact on the economy because trade was only 2% of GDP at the time. It does serve as a fake propaganda for Free Traitors™.

[BroJoeK]

DiogenesLamp: "My examination of the problem indicates it was a consequence of Alexander Hamilton's philosophy of using government to increase the wealth of industry.
This entire philosophy is different from Jefferson's, which is 'Government governs best which governs the least.' "

I think you do understand that in 1788, while debating ratification of their new Constitution:

1. Those who supported ratification called themselves "Federalists" and their opponents "anti-Federalists".
   Leaders of the pro-Constitution Federalists included Washington, Adams, Franklin, Madison and Hamilton.

   After ratification in 1788, most leaders of the pro-Constitution faction joined the Federalist party, who later became Whigs and then Republicans.

2. Those who opposed ratification called themselves "true Federalists" and called their opponents "nationalists".
   Leaders of the anti-Constitution anti-Federalists included Jefferson, Monroe, Mason, Patrick Henry, Samuel Adams and George Clinton.

   After 1788, most leaders of the anti-Federalists joined Jefferson's Democratic-Republicans, today's Democrats.

My point is, Democrats were opposed to the new Constitution from Day One, and have been opposed ever since, though their reasons change over the years, their opposition never did.

DiogenesLamp: "Hamilton counseled activist government which took a role in Wealth creation, but in so doing, intertwined the interests of Industry (Corporations) with Government.
Now corporations had an interest in controlling government, because it had become a primary tool through which they could profit."

It sounds here as if you don't grasp the basic idea of capitalism, which is: capitalism is a construct of law and cannot exist outside the protections of a legal system.
Therefore, inherently, a capitalist must be vitally concerned with defining and defending the laws under which he or she exists.
Of course, capitalists have never been the only ones at the legal negotiating table (i.e., Congress), however, as the wags tell us, whenever capitalists are excluded from the negotiations table, then capitalism itself is "back on the menu, boys".

In US history, capitalists were always "at the table" and capitalism itself was never "back on the menu" as has happened in many other countries.

[BroJoeK]

central_va: "Smoot Hawley had almost no impact on the economy because trade was only 2% of GDP at the time.
It does serve as a fake propaganda for Free Traitors™."

I don't know where your 2% number comes from, but the reality has been much different.
So let's look at some typical years for US trade % of total GDP:

1. 27% in 1790 -- Imports+Exports ($59 million) of $220 million GDP.
2. 21% in 1808 -- Imports+Exports ($126 million) of $600 million GDP.
3. 17% in 1830 -- Imports+Exports ($165 million) of $1.0 billion GDP ("Tariff of Abominations").
4. 20% in 1860 -- Imports+Exports ($876 million) of $4.4 billion GDP
5. 14% in 1900 -- Imports+Exports ($2.9 billion) of $20.6 billion GDP

6. 13% in 1928 -- Imports+Exports ($12.3 billion) of $97.4 billion GDP
7. 11% in 1930 -- Imports+Exports ($9.9 billion) of $91.2 billion GDP
8. 8% in 1934 -- Imports+Exports ($5.3 billion) of $66.0 billion GDP

9. 14% in 1944 -- Imports+Exports ($30.4 billion) of $219.8 billion GDP
10. 12% in 1970 -- Imports+Exports ($122.7 billion) of $1.04 trillion GDP
11. 24% in 2024 -- Imports+Exports ($7 tillion) of $29 trillion GDP

So, our historical average of imports+exports to GDP was circa 15%, which fell to a low of 8% in 1934, partially as a result of Smoot Hawley and the Great Depression reduction in GDP from $97 billion in 1928 to $66 billion in 1934.

Today's US international trade is back up to percent of GDP levels our Founding Fathers experienced.

[central_va]

During the 1930 trade was between 5% and 9%. Smoot Hawley couldn’t have been “devastating”....Makes a nice scapegoat for gloBULLists such as yourself.

[central_va]

Apple for one couldn’t source all component parts domestically even if it wanted to

What kind of simplistic thinking is that? Factories can only be built in the third world? Is that what yhou think?

[central_va]

such as refined petrolieum products, crude oil and natural gas, cars, integrated circuits, semicinductors, civilian aircraft, aircraft parts, pharmaceuticals, medical devices/instruments, rice, soybeans, wheat, and more

Globalist snakes forget there is a domestic market demand for all of those things.

[central_va]

Somebody should explain that tariffs raise revenue and PROMOTE domestic industry. Funny how all of you Free TRAITORS™ seem to love the income tax. So much so I'd think you are a bunch of communists.

[central_va]

So interpreting your post: the income tax is progressive and the tariff is regressive. So Free Traitors™ are not only wrong, they are also progressives.

[central_va]

A flat tax does not promote domestic industry.

[Churchillspirit]

Tariffs on imported food ?

[central_va]

there is a domestic producer for anything and everthing

BUT THERE COULD BE.....

[Churchillspirit]

Great idea!

[central_va]

So what has the lack of a tariff for 50 years done to industry? I see towns all over VA that are really f’d up that were viable indistrial producers a few decades ago. But who cares about that right?

[shadowlands1960]

No specifics.. a general proposition.

[x]

Dude, you already responded to that last week. I’m not a free trader and I don’t love the income tax. I’m just pointing out that the government is involved in so many things that the tariff won’t pay for it all.

Like it or not, it’s not the 18th century any more. Our economy is too tied in with the rest of the world economy for us to go it alone. Consumers are too in love with cheap foreign stuff and don’t want to have to pay the higher prices that a strick Made In America policy would bring.

You are just reacting emotionally and not taking the real world into account.