gdanmitchell
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Steve Spencer wrote:
gdanmitchell wrote:
I’m no economist, but one of the points that people overlook in the current situation is that when a tariff (lets say of 20% to 50% in round numbers) is applied, there is a double (OK, triple) whammy effect on taxes on purchases.
First, the tariff itself is a federal tax. (I’m amazed at the number of people who don’t like federal taxes or who think that htey are too high who are all in for this federal import tax, applied by fiat with no legislative process.) A tariff is a tax paid to the federal government by American purchasers.
Second, let’s say that the import tax adds $10 to the retailer’s cost to acquire it. Retailers generally apply a percentage above wholesale (roughly speaking) to determine the retail price. So that $10 import tax might produce a $1 to $10 increase in the retail price beyond the tariff amount itself, depending on the product type.
Third, because this higher import tax and its secondary effects are effectively hidden behind a higher retail price (e.g. — you don’t see a line for “tariff” on your receipt) consumers now also pay higher state and local sales taxes on the same item. Let’s say that you used to buy product X for $1000, but that tariffs have increased the price to $1200. If you are paying (to use a nice round number) a 10% sales tax, you are now also paying an additional $20 in state and local sales taxes on the item.
And a reminder: It isn’t just camera gear. It is almost everyone you buy: cars, auto repair and parts, computers, phones, furniture, clothing, appliances, shoes, sports equipment, and on and on… This might be one of the largest and must abrupt tax increases on Americans in their lifetimes, all imposed with no discussion or legislative action.
Great, eh?
I mostly agree, but let's be clear about congress' role in tariffs and taxes and exactly what has happened. The "big beautiful bill," that was passed by congress does include the extra income from tariffs in the planned budget. In a way it was congress' approval of the tariffs that the president unilaterally implemented. That budget passed by congress includes both the tax increases that comes through tariffs and tax decreases that come from reductions in the income tax. What the president and congress have done is shift taxes from income tax in which wealthy people pay more than poorer people to tariffs in which every one pays the same rate. In addition, the income tax reduction were not equally distributed. The income tax reductions are higher for the wealthiest people. Overall taxes weren't raised or lowered. There was just a shift in which wealthy people pay less and poorer people pay move. There has not been transparency about this shift, I think for obvious political reasons but the shift in who pays for the government is clear, and I think it explains why some people like this shift.
That redistribution of taxes to poorer people away from wealthier people is compounded by the budget which reallocates spending from social programs that benefit poorer people to spending on defense and immigration enforcement. I know this is controversial, but I am not trying to be controversial. It is indeed what the government has done and it isn't just the president. The congress has signed off on this plan with the big beautiful budget bill passed by congress. The question in a democracy is whether people want to support this sort of policy going forward. That is what elections are for, but those elections should occur with a clear understanding of what policies have been implemented. We need to understand what the president *with congress' approval* has done and vote according to whether we like those policies or not and whether we think other candidates have better policies.
I cannot quarrel with you assessment of the combined effects of changes in legislated tax law — the great majority of Americans are harmed while a much smaller percentage of mega-rich make out like bandits, the taxes become less progressive, etc..
We need to be a bit careful though about suggesting that the shift to adopting a huge new level of taxation on American consumers via grossly inflated tariffs was the result of any kind of legislative action. It clearly was not. It was a unilateral imposition from the executive branch, which is one among many of the reasons that it is subject to legal action, some of which the administration has alreayd lost.
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